Life Insurance Living Benefits

 

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Living benefits can help you at a time when you are at your most vulnerable.

 

Just within the last 5 years or so, some insurance carriers have been offering insurance policies with living benefits or accelerated benefit riders. The beautiful thing about living benefit riders is that it allows you to get part of your policy’s face amount – in some cases, up to 90% or more, if you are diagnosed with a serious life-threatening disease, such as cancer or some other qualifying condition.

Living benefits funds may be dispersed as either a one-time lump sum or through installments. The good thing about the living benefits funds is that the cash isn’t limited to paying the medical bills. The cash is yours so you can spend it on whatever you like.

Which means you can pay off your mortgage, pay for your daily living expenses, install a wheelchair ramp, buy a new car, or whatever you like. There are no strings attached. However, the cash that you receive will be applied against your policy’s death benefit. So, if the reason you took out the policy was to leave something behind for your heirs, then you need to take that into consideration, as you could be significantly reducing the death benefit.

Generally speaking, the money you get once you access your living benefits may not be subject to federal income tax, assuming that certain criteria is met, which basically means that you must be classified as being terminally ill.

Another good thing is that the living benefits you receive from your insurance policy usually aren’t subject to state income tax either, although this isn’t across the board in all states, so check to see if it applies in your state.

One important thing to note is that you will still be responsible for paying the monthly premium, even though the death benefit has been reduced. So it’s important to keep the policy in force.

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