In relation to life insurance, everyone knows what a “death benefit” is.  It is the obvious reason that most consumers buy it.  If (when) they die, a beneficiary collects the face amount of the policy.  Pretty basic stuff.

In recent years some attention has been given by carriers to provide benefits that an insured could take without the inconvenience of being dead.  Some refer to it as life insurance you don’t have to die to use.  In the industry we refer to these as “Living Benefits” for obvious reasons.

What are Living Benefits?  They are specific coverage categories that trigger an option on the behalf of the insured to take some portion of the face amount of a life insurance policy.  The amount of the advance against the policy will vary based on the severity of the ailment, i.e., its impact on life expectancy, and specific carrier criteria. Let’s examine the types of events that trigger these Living Benefits.

What Types Of Living Benefits Are Available?

If the life expectancy is greater than 24 months, then a portion of the plan may still be captured where the plan includes other living benefits.  A structured settlement would still be available although there are many regulatory hurdles beyond the scope of most insurance agents.  Here are some other triggering events.

Frequently asked Questions

Here is an example:  The face amount is $500,000.  There is a diagnosis of heart attack and the accelerated benefit is 30%.  The insured takes 20% or $100,000.  With many plans but not all, the death benefit is reduced to $400,000 and the monthly premium is reduced accordingly.  It is important to note that these distributions are subject to income tax, so especially in the case of a terminal illness, it is advisable to take advances only to cover needs considering the balance is tax free to the beneficiary soon enough.

Find your niche.  Insurance companies have preferences.

Whether you are a bellwether of good health, or have strong concerns regarding your health history, it is of great importance to apply with the insurer most likely to issue your policy and at the lowest rate.  Contrary to popular belief, for those who have health concerns the “shotgun” approach to applying by submitting to numerous companies simply does not work.

The reasoning behind this is that companies and the underwriting staff are all in know and the records that are used (MIB medical, DMV, Credit) are universal sources that all companies rely on.  Paramed exam results are usually valid for six months.  Knowing where to place the application is the single most important part of the process.  That means being objective and candid about your health and working with a knowledgeable independent agent.

Especially in high risk (Substandard) cases, assembling and presenting an effective argument to an underwriter, much like an attorney is key to the most positive outcome for you.  Having an effective advocate to guide you at no risk or cost to you is what we do.

Leave a Reply

Your email address will not be published. Required fields are marked *