Different Types of Living Benefits

The benefits of the benefits

If you thought that life insurance was only accessible once someone dies, then you would be wrong! Many life insurance policies come with what are called living benefit riders. The key word here is “living.” Living benefits give you the option to use a certain amount of your life insurance death benefit proceeds while you are alive. Some insurance policies come standard with living benefit riders. Others you will have to pay a slight bit extra each month. The amount is usually minor, depending on your age.

Not every policy from every insurance carrier comes with every rider as an option. Some carriers offer a couple riders with almost all their products for free. For instance, final expense products from American Amicable come with the accelerated benefit riders for terminal illness and for confined care. Those two are at no additional cost. If you get an indexed universal life product from Fidelity and Guarantee Life, then you would get the critical, chronic, and terminal illness riders for free. The overloan protection rider is also included as an added benefit.

There is one aspect of receiving part of your death benefit that most people are unfamiliar with. It is up to you and your family how you choose to spend the money you receive from the insurance carrier. You can spend it on the bills that come with the situation, take a trip to a distant land, or help pay off debt. The choice is completely up to you.

Terminal Illness Rider

With this rider, you can access a portion, or all, of your death benefit early if you are diagnosed with a terminal illness. The diagnosis must come from an actual doctor, and it would have to state you have a life expectancy of approximately 6-24 months. Each carrier may have different specifics for this rider.

Chronic Illness Rider

You will have access to a portion of your death benefit early if you develop a chronic illness. To qualify, you would have to not be able to perform two of the six Activities of Daily Living (ADL). These six categories are eating, bathing, getting dressed, toileting, transferring, and continence. Transferring means being able to move from one body position to another. Continence means being able to control your bowel and bladder movements.

Critical Illness Rider

Here you will have access to a portion of your death benefit if you develop a critical illness that comes with high medical costs. It could also be something that comes with a short life expectancy. Such things as a heart attack, kidney failure, life-threatening cancer, ALS and stroke would qualify.

Long-term Care (LTC) Rider

Some of the death benefit can be used for long-term care expenses if you can no longer perform at least two Activities of Daily Living. This rider could also be called an accelerated death benefit for long-term care services rider or long-term care coverage. It is not to be confused with a Long-term Care Policy, which is a completely different policy.

Grandchild Rider

This rider provides each grandchild and great grandchild a certain amount of death benefit up until a certain age, usually 18-21. This benefit can also guarantee their insurability if they wish to convert to a different policy. That just means they would have guaranteed acceptance for an insurance policy. Even if they have had poor health, they can still convert into a policy in the future.

Child Term Rider

If you do not want to purchase an individual policy for your child, you can elect to have a child term rider. Most carriers offer this option and is inexpensive. The downfalls are the maximum you can get coverage for is around $25,000. Also, if the primary insured does not make the premium payments, then the child will no longer be covered. The average amount is $10,000. This rider typically does not require a medical exam.

Nursing Home Waiver of Premium Rider

If confined to a nursing home, the policy premiums can be waived for a certain period. The period varies but is typically 90 days. This way the insured would not have to pay the premium during this time. It will allow the insured to focus on paying hospital bills or if he or she just outright forgets.

Accidental Death Benefit (ADB) Rider

The ADB rider provides an additional amount of death benefit if the insured passes away from an accident. An accident would be a slip, trip, fall, crash, and so on. If chosen, it is usually twice the applied for death benefit. Some carriers offer this rider free of charge or just a bit more each month. This rider should not be confused with an Accidental Death and Dismemberment (AD&D or AD) Policy. This is a type of policy, such as whole life or term.

$20,000 (death benefit) + $20,000 (ADB) = $40,000 (total death benefit)

Spouse Term Rider

This is a rider that the primary insured can choose to add if he or she does not want their spouse to be insured with their own policy. It is a cheaper option, just like the child term rider option stated earlier. It is a good option for this reason; however, it will only allow a certain amount of death benefit. Just like with the child and grandchild term riders, if the premiums are not paid, then this rider would be null and void. The spouse would no longer be covered.

Return of Premium (ROP) Rider

This benefit is great to have if you are looking to purchase a term or accidental death policy. Return of premium means exactly what its name implies. After your term is up, you will receive back either all, or a certain amount, of your premiums. However, if you used any of the funds during the term then you would not receive that amount.

For instance, a 30-year-old male could purchase a term policy with a ROP option for mortgage protection purposes. Once the term ends, he would receive back $42,357.60. His monthly premium for 30 years would have been only $117.66. The older you get, the more it will cost to add a ROP option.

This is not the final and only list of riders available. There are more but they are the primary ones you should be looking for. They offer you more options and opportunities to get the most out of your insurance policy.