What Are Living Benefits for Life Insurance?

What Are Living Benefits of Life Insurance?

Living benefits are features of life insurance policies that provide financial support while you're still alive. The type of payment you can receive depends on the type of life insurance you buy and the details of your specific policy.

• Policy riders: An insurance rider, also known as an endorsement, allows you to customize your policy for your specific needs. Accelerated death benefit riders allow you to receive a portion of your benefit in certain situations, like if you're diagnosed with a serious illness and need long-term care. Insurers may offer these riders on permanent or term life insurance policies.
• Cash value component: Permanent life insurance policies include a savings component called cash value, which grows over time and is separate from the death benefit. You can access the cash value through loans or withdrawals while you're alive. While it's not a living benefit, it can function like one.

Learn more: Can I Withdraw Money From My Life Insurance?

Types of Living Benefits Riders

The selection of living benefits riders may vary with each insurer, but here are the most common types:

Terminal Illness Rider

The terminal illness rider provides an accelerated death benefit if you're diagnosed with a qualifying terminal illness that significantly shortens your life expectancy. You can use the money for anything you want, whether it's for long-term medical care costs or travel expenses. Using the rider will reduce the money your loved ones receive after you die.

These riders may be automatically included on term and permanent life insurance policies. If the rider is a standard feature, it won't increase the cost of the policy.

Chronic Illness Rider

A chronic illness rider allows you to get some of your death benefits while still living if you're diagnosed with a chronic illness. Insurers typically define a chronic illness as a permanent condition that prevents you from performing basic daily living functions, such as eating and using the toilet. You can use your accelerated death benefit for anything, but tapping the policy while you're alive will reduce the payout for your loved ones after you die.

These riders are sometimes included in life insurance policies at no additional cost.

Critical Illness Rider

A critical illness rider allows you to tap your death benefits while you're alive if you're diagnosed with a specified life-threatening illness or medical need. For example, you may be able to use the rider if you have a stroke, heart attack, cancer or major organ transplant. Insurers typically allow you to make up to one critical illness claim per year and per qualifying condition.

Long-Term Care Rider

A long-term care (LTC) rider accelerates your death benefit to cover long-term care costs while you're alive. You can access a set portion of your death benefit, such as 50%, and it will reduce the final payout your beneficiaries receive after your death.

Learn more: Reasons to Buy Life Insurance Now

Cash Value as a Living Benefit

A permanent life insurance policy may offer the riders mentioned above, but it also has a component called a cash value account, which can act as a living benefit.

The cash value account within your policy acts like a savings vehicle, where the cash accumulates over time while earning tax-deferred interest. You can take out loans or withdrawals from the policy's cash value during your lifetime to cover financial needs or pay premiums.

Learn more: Ways to Benefit From a Life Insurance Policy While You're Alive

How Much Is Life Insurance With Living Benefits?

The cost of life insurance varies with each policyholder, depending on factors like age, health, insurer and the amount of the death benefit.

Some life insurance policies automatically include accelerated death benefit riders. If the insurer includes one of these riders as standard coverage, then the rider won't increase the cost of a policy. But if the rider is an optional add-on, then you'll pay extra to include it. Terminal illness riders are often standard, while chronic and critical illness riders add about 5% to 15% to your base premium.

The cost also depends on what type of policy you buy. Generally, permanent life insurance is more expensive than term life insurance because it provides guaranteed coverage for your whole life.

Learn more: Which Is Better: Term or Whole Life Insurance?

Is Life Insurance With Living Benefits Worth It?

Buying life insurance with living benefits can be worth the added cost if you want coverage that helps while you're still alive—not just after you're gone. These riders can provide early access to your death benefit if you're diagnosed with a serious illness, which offers a financial cushion for medical bills or lost income.

If you don't have separate long-term care or critical illness insurance, this feature can add valuable protection. Just make sure to weigh any extra costs against the likelihood you'll need coverage. Consider your health history, family needs and existing coverage before buying a policy.

Learn more: When Is It Too Late to Buy Life Insurance?

How to Get Life Insurance With Living Benefits

It's best to consider living benefits while you're shopping for a policy rather than after buying one. Some, but not all, permanent life insurance policies allow you to add a living benefits rider to an existing policy. Term life policies usually won't—or will only allow it at renewal or if you convert the policy to permanent coverage.

With either type of insurance, whether you can add living benefits while the policy is in force depends on the insurer and policy language.

When you're reviewing a policy, check whether riders are automatically included and how they work. Ask the insurance company about the types of riders it offers and how much it increases the premium.

Learn more: Factors That Affect Life Insurance Costs

Frequently Asked Questions

The Bottom Line

Living benefits are a life insurance feature that provides early access to your death benefit. Some life insurance policies automatically come with living benefits riders, so they won't increase your costs. But check the policy and ask questions to be sure.

No matter what type of life insurance you're in the market for, having good credit could make it more affordable. Many insurance companies check credit-based insurance scores when evaluating your application.

These scores differ from the consumer credit scores lenders use, but are based on many of the same factors. Check your FICO^® Score^Θ for free before shopping for life insurance. If your score isn't where you'd like it to be, taking steps to improve your credit score could mean lower life insurance premiums.