What are Living Benefits?

Modern term policies offer many extensions of coverage for things that may, and actually are more likely, to occur to the insured while they are living. 3 of the most common features added are riders referred to as Living Benefits. These are added coverages for Terminal Illness, Chronic Illness, and Critical Illness. The values of these added benefits are directly tied to the amount of coverage issued, so death benefit value= living benefit values.

Terminal Illness Coverage:

The most straightforward and simple to understand rider is the terminal illness benefit. This coverage is actually often issued on policies that are not carrying the full suite of living benefits, and usually come at no extra charge. If the insured is diagnosed by a licensed medical provider with a illness expected to cause the death of the insured within the following 18 months, carriers will allow the insured to access up to 90% of the death benefit in advance in order to pre-plan their final affairs.

Chronic Illness Coverage:

This benefit offers the insured a method of financing a disability. If the insured cannot do 2 of the 6 activities of daily living. The six standard ADLs are generally recognized as bathing, dressing, toileting, transferring (getting in and out of bed or chair), eating, and continence. After 90 days of having these limitations the insured would be deemed disabled and can make a claim for a lump sum payment on the death benefit. The amount of money awarded will be determined by the severity of the disability and the requested amount.

Critical Illness Coverage:

The critical illness rider is perhaps the most valuable of these extended benefits. This coverage offers the ability to access death benefit after the diagnosis of a major disease or illness. The illnesses covered are outlined in the contract, but often include diagnoses such as; Cancer, kidney failure, heart attack, COPD, alzheimer’s, multiple sclerosis and stroke. Being some of the most common ailments experienced by the U.S. population, the odds of this benefit being used is moderately high.

How much do Living Benefit Plans Cost?

The kicker to this whole thing is that on average a living benefit plan offering 3X the amount of coverage can be issued in amounts only $10-$30 more expensive than a plan without, on a monthly basis. The prices of any life insurance policy are of course largely determined by the death benefit, age, and health of the proposed insured.

Who needs Term Life Insurance with Living Benefits?

Because of the large added value for little increase in cost, we find most who purchase term policies to cover things like mortgage, business risk, income replacement, and estate planning are most interested in this modern type of plan. For those who are self-employed and have no access to employer provided benefits like disability and health insurance, these plans can be instrumental in providing low cost alternatives while the business is being built.