Jamie explains how he got a client a life insurance benefit after she was diagnosed with cancer. They had to wait a while after her initial diagnosis before applying. When the cancer returned, she used a portion of the accelerated death benefit while she was still alive. She eventually died of the cancer, but Jamie was able to appeal to the insurance company to pay the full death benefit.
A living benefit option in a life insurance policy allows the policyholder to access a portion of the death benefit while they are still alive under certain conditions. These benefits are designed to provide financial support when the policyholder may face significant expenses or loss of income due to serious health issues.
Here are some common types of living benefits:
- Accelerated Death Benefit (ADB): This option allows the policyholder to receive a portion of the death benefit early if they are diagnosed with a terminal illness and have a life expectancy of typically 12 to 24 months or less. The amount received is subtracted from the death benefit paid to beneficiaries upon the policyholder’s death.
- Critical Illness Rider: This rider provides a lump sum payment if the policyholder is diagnosed with a covered critical illness, such as cancer, heart attack, or stroke. The payout can cover medical expenses, daily living costs, or other financial needs. The amount paid out reduces the death benefit accordingly.
- Chronic Illness Rider: This option benefits if the policyholder becomes chronically ill and cannot perform at least two of the six activities of daily living (e.g., bathing, dressing, eating) or requires substantial supervision due to cognitive impairment. The benefit can help cover long-term care costs or other expenses related to the chronic condition.
- Long-Term Care Rider: This rider offers benefits to cover the costs of long-term care services, such as nursing home care or in-home care, if the policyholder cannot perform activities of daily living or requires substantial supervision due to cognitive impairment. Like other living benefits, the payout reduces the death benefit.
Living benefits can provide peace of mind and financial support during difficult times. Still, it’s essential to understand how they work and how they may affect the overall value of the life insurance policy.
