Having life insurance in place can allow you the peace of mind in knowing that those who love and care about will not have to face financial hardship in the case of the unexpected. That is because, in addition to providing funds for replacement of income, the cash that life insurance offers can also be used for any number of other needs, such as the payoff of debts, and/or future college funding needs.
Because life insurance coverage can differ from one plan to the next, it could be required that you need to “customize” your policy to better meet your specific anticipated needs. One way to do this is by adding a rider to the policy.
Why “Customizing” Your Life Insurance Coverage is Important
While there are numerous types of life insurance policies available today, most standard plans do not leave a lot of room for modifying or customizing – other than with the amount of coverage you have, and possibly the length of the policy if you are going with a term life insurance option.
Therefore, by adding certain riders, you can have the additional protection that you may need – which could even include certain benefits that can be used while the insured is still alive. One such option is a living benefits rider.
What is a Living Benefits Rider?
As its name suggests, a living benefits rider on a life insurance policy can allow the insured on a to access funds from the death benefit while he or she is still living. (This benefit is also frequently referred to as an accelerated death benefit rider). These funds that are obtained by the insured may be used for any need that the individual sees fit, such as the payment of medical (or other) bills, the payoff of debt, or even for taking a nice vacation. In most cases, the result of accessing such funds can help to make the insured’s remaining days more comfortable.
While the obvious value for most people who have life insurance is the death benefit that the policy can provide, there may be times when additional cash is needed – and the only place to access that is through the life insurance policy.
Although permanent life insurance policies have cash value, taking the needed funds from there is not always the best alternative. One reason for this is because, should this money be withdrawn, it could be taxable to the recipient. Also, by taking out too much, it could also end up lapsing the coverage – at a time when the coverage is needed the most.
Also, the amount of the cash value that may be available to use could be many times smaller than the amount of death benefit proceeds that could be attained. With that in mind, a living benefit rider on a life insurance policy can truly help to leverage your financial options.
How Does a Life Insurance Living Benefits Rider Work?
Although living benefits riders can vary from state to state, and from one insurance company to another, in general, this rider will entitle the policyholder to an early, or “accelerated,” payout of the policy’s death benefits.
The amount of benefit that can be received can range from a certain percentage of the total, or even the entire amount of the policy’s proceeds. To qualify for this payout, the insured will typically have to have been diagnosed with an illness that deems their life expectancy to be one year or less. In some cases, this rider must be added at the time of policy issue, and in others, it may be added to the policy at a later time.
If a life insurance policyholder takes advantage of these living benefits, it is important to note that the amount of money that is accessed will be counted against the amount of the death benefit that is eventually paid out to the policy’s beneficiary at the time of the insured’s passing.
How Much Does a Living Benefits Rider Cost?
The cost of a living benefits rider can vary, based on the policy and the offering insurance company, as well as the age and health condition of the insured at the time that the rider is being added.
If this rider is chosen, it may be purchased through additional, regular premium payments. Alternatively, some insurers may simply require a one-time fee for this rider. There are also some instances when there will be no additional premium outlay required to obtain the living benefits rider.
Should You Consider Adding a Living Benefits Rider to Your Life Insurance Coverage?
While a living benefits rider may not be for everyone, there are some people who may wish to consider having this option. For example, if certain types of terminal illnesses run in your family, then this could be a good safety net. It could also be something to consider if you anticipate having a high amount of uninsured medical expenses.
Today, the cost of medical and long-term care is continuing to rise – in most cases; it is rising faster than the inflation rate. This can make some services out of reach for many who do not have the financial wherewithal.
Because of that, it may be necessary to be creative when determining where the money will come from if you need it for high medical and healthcare related expenses. The living benefits rider can allow an avenue for this – and it can also typically provide you with much more than you could receive a policy surrender or loan. This is because the amount is based on the policy’s face value (i.e., death benefit amount) as versus just on the cash value.
How to Find Out More About Life Insurance and Living Benefits Riders
If you’d like to find out more about life insurance and living benefit riders, we can help. Our experts are happy to discuss with you how these riders work, and whether or not it could be a viable alternative for you.
We are an independent life insurance brokerage, and we work with many of the top life insurance carriers in the marketplace today. Therefore, we can help you in determining which company and policy may be best for you, as well as for your budget. We can do this for you quickly and easily, and often without you having to meet in person with an insurance agent.
In fact, we can provide you with the information that you need directly via your computer. If you are ready to learn more, then please feel free to reach out to us online by simply filling out our online quote form.
We understand that the purchase of life insurance can be somewhat confusing – particularly when considering the addition of riders like the living benefit rider. But working with an expert can be beneficial in knowing that you are going in the right direction. So, contact us today – we’re here to help.