How can Life Insurance Avoid Debt?
How can life insurance help avoid debt and bankruptcy?!
What is the largest source of debt in America?
Medical debt in America is quickly becoming the largest and main contributor to overwhelming household debt and eventual bankruptcy. USA Today reported recently that possibly up to 66.5%, equating to 530,000 cases a year, of bankruptcy declarations are caused by compounding medical debt. This is in spite of the fact that 90% of Americans report having some form of health insurance. As recently as 2023, 23% of Americans reported having over $10,000.00 of accrued medical debt.
Most of this debt occurs from major medical events, such as a diagnosis that requires prolonged and advanced treatment or surgery. Events such as cancer, stroke, heart attack, kidney disease, or injury leading to a long term disability.
How can life insurance alleviate medical debt?
Modern term and universal life insurance plans come with a suite of attachments of coverage called riders. A common label given to three of the most valuable riders are called Living Benefits. These are additional rights to claim and receive a portion of the total death benefit for major medical events categorized as Critical, Chronic, and Terminal Illnesses.
How do living benefits on life insurance work?
The aforementioned categories (Critical, Chronic, and Terminal Illnesses) each have their own specified qualifications to be able to make a claim. Critical illnesses are detailed in the contract but often include diagnosis of cancer, stroke, kidney disease, liver disease and heart attack. Chronic illness qualification is in line with the ADA guidelines of what determines an individual to be long term disabled. This would be the insured’s inability to complete 2 of the 6 activities of daily living for a period greater than 90 days. Terminal Illness is the most simple of these ways of advancing your life insurance proceeds. If the insured is given 18 months or less of expected life duration they could make a claim under this rider.
The common theme here is that your life insurance money can be paid out to you while you are living. The money paid out is yours, with no promise to repay, even if you recover from your medical event! Unlike long term care, Medicare or Medicaid, there are no strings attached, you may use the benefit at your discretion.
The Best Companies that offer living benefit life insurance
Transamerica was selected by USA Today in 2023 as the best company to offer living benefit life insurance. The combination of coverage, price, and rider options came out on top of the 15 top insurers studied.
Nationwide is a A+ AM Best rated company with extensive product selection offering living benefits. Nationwide came in at a close second with Transamerica for their living benefits offering package.
North American offers the same living benefit package on as wide array of term policies as the other top insurers. Their low price and little requested medical information required for issue makes them a top contender in the living benefit life insurance market.
The open market for life insurance is continuously progressing and competing with one another to provide the most beneficial coverage for their prospective clients. Bay Life is the DMV expert in navigating and negotiating all of the companies and products being offered in order to leverage the best results for our clients.