Living life insurance might sound like an oxymoron to anyone who’s unfamiliar with the product. After all, life insurance pays out when the insured dies. It can’t help while the insured is still living – or can it?
With living life insurance, the answer is yes. It can.
Living benefit riders allow you to access the benefit before death if you become terminally, critically or chronically ill, while permanent life insurance policies accumulate a cash value that can be tapped for absolutely any reason.
Living Benefit Riders
To see how living benefit riders can help, let’s look at two hypothetical examples.
In the first hypothetical example, we have Mary. Mary has a life insurance policy that only pays a death benefit. She becomes terminally ill. Her family struggles to pay the medical bills. This puts a great deal of stress on Mary and her family during an already difficult time. When Mary passes away, her family receives the death benefit from her life insurance and is able to pay the medical costs and funeral expenses.
In the second hypothetical example, we have Sarah. Sarah has a life insurance policy with living benefit riders. She becomes terminally ill. She uses the living benefits rider of her life insurance policy to pay her medical bills and relieve the financial stress her family is experiencing. Although this is still a difficult time for Sarah and her family, they don’t have to worry about money and are able to spend Sarah’s last days the way they want.
In both examples, the families were helped by the life insurance policy, but only the family in the second example was able to see the benefits while the insured was still alive. That’s the advantage of a life insurance policy with living benefits.
It’s hard to think about yourself becoming critically ill, but it’s important to understand the risk.
According to the CDC:
- 735,000 Americans suffer a heart attack each year.
- 1 million U.S. adults – 11.5 percent of the population – have been diagnosed with heart disease.
- 9 million U.S. adults have been diagnosed with cancer.
- 9 million U.S. adults have been diagnosed with kidney disease.
- 4 million U.S. adults have had a stroke.
Permanent Life Insurance and Cash Value
Living benefit riders can help people experiencing a serious illness, but what about people who are lucky enough to stay healthy? They may still need additional funds, and once again, the right life insurance policy can help.
Permanent life insurance policies accumulate a cash value over time, and the insured can tap into this cash value. The money is subtracted from the death benefit and does not need to be paid back – and it can be used for any purpose.
Even better, the withdrawals can be made tax-free. This makes permanent life insurance an attractive investment tool that can be used to generate tax-free retirement income.
The Right Life Insurance Policy for You
Most people think of the death benefit when they think of life insurance. These days, however, there’s a wide array of policy types and riders. Some of these make life insurance useful during the insured’s lifetime.
Would you like to know how life insurance could fit into your financial plan? Download our 6 Pillars of Financial Planning report, or contact us.
