Your Life Insurance Can Pay Out Before You Die
Most life insurance is sold as a payout for when you die. Living benefit riders let a policy pay out while you're still alive, for a critical, chronic or terminal illness diagnosis. Almost nobody knows to ask about it.
Ask most people what life insurance is for, and they will say the same thing. It pays your family when you die.
For a long time that was the whole story. Today it is only half of it, and most people have never been told the other half.
Most life insurance sold today can include living benefits. These let you take part of the payout while you are still alive, if you become seriously ill. Most families I sit down with hear about them from me first.
What sets one off
Living benefits usually cover three kinds of illness:
- A critical illness, such as a heart attack, cancer or a stroke
- A chronic illness, meaning you need help with everyday things like bathing, dressing or eating. Memory illnesses like Alzheimer's count here too
- A terminal illness, meaning doctors do not expect you to survive it
The wording differs from one insurance company to the next. So does how much of the payout you can take. That is the part that matters most and gets explained least. A policy can technically include living benefits and still be very hard to claim on.
How this differs from long-term care insurance
The two overlap, which is why they get confused.
Living benefits are built into a life insurance policy you bought for another reason. The money you take comes out of the payout your family would have received. There is only so much of it, and using it leaves less behind.
Long-term care insurance is a separate policy. It is bought and sized for the cost of care itself, which can run for years.
Why this changes the question
Most families buy life insurance for the worst case. An illness you survive is the more common one, and it can stop your income while the bills keep coming.
What to do if you already have a policy
If you bought life insurance in the last few years, there is a fair chance it already includes living benefits. Plenty of people are never told.
Dig the policy out and check, or ask whoever sold it to you two questions. Which illnesses set it off, and how much can you take?
If you do not have coverage yet, ask those two questions before you buy rather than after.
If someone you know is shopping for life insurance right now, this is the question worth passing on.
If you'd like help understanding what your current policy actually covers, or want to see what living benefits would look like as part of new coverage, reach out and I'll walk through it with you.
Where this applies
The parts of a plan this article touches, explained in full.
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