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What are living benefits for life insurance and do I need them?

We all know that life insurance gives a benefit when you die. Most people have some type of term life insurance or group life insurance but that is only real assistance when you die. Many life insurance policies also contain living benefits! What about all the combinations of things that could happen to you before you die? Life Insurance could seem pretty worthless if you need that money today for a chronic or critical illness. Living benefits might be the one exception a younger person might want to get life insurance before they are married or have children. Having these benefits could prevent you from doing the worst and forcing you to use or access an IRA, 401k, liquidating CD’s or other assets preemptively.

Living benefits are meant to cover the following types of illnesses: Critical Illness, Chronic Illness, and Terminal Illness. Critical Illness is a specified medical condition that may qualify for the critical illness benefit to include kidney failure, stroke, cancer, major organ transplant, and heart attacks. Chronic illness is defined as being permanently unable to perform, for at least 90 consecutive days, without substantial assistance from another person, at least two Activities of Daily Living (toileting, continence, bathing, dressing, eating, and transferring) or requires substantial supervision by another person to protect against threats to health and safety due to severe cognitive impairment. Terminal illness is defined as the insured has been diagnosed with a medical condition which results in a life expectancy of 24 months or less (can vary by jurisdiction).

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  • If you have employer-provided short term and long term disability benefits supplied this should lessen your need for living benefits. Of course, if your employer does not provide these this increases the need for you to find living benefits with your life insurance. Also, remember that Social Security disability benefits do not begin until after the sixth full month of the disability. Every living benefits policy offers different levels of benefits to be dispursed at different rates. Ensure your insurance advisor shows you the illustration with the specific benefits and the rate the will be given to you.

    What should you use your living benefits for? Well, this depends on a lot of factors. If you are ill your estate might be loaded with medical bills your health insurance did not cover. If you are covered well with good health insurance and have no excessive medical bills you might want to attack your current debt load. Paying off credit cards, cars and then house debt should assist you in relieving you of your income needs. The great thing about living benefits it is up to you what you get to use them for.

    Protection with Living Benefits
    Protection with Living Benefits

    You are probably asking yourself how much a month do living benefits cost with a term life insurance policy. Of course the larger amount the policy the more expensive the living benefits. Still, it is about 25 to 50% more expensive for living benefits than the typical term policy. Still, you might want to layer the policies with a term life insurance policy that has them and another one that does not to keep costs down. Our two preferred companies, for living benefits are Transamerica and North American still we will run a quote with your individual attributes to find the most appropriate policy at the best rate for you. If you want to do a review of your current life insurance policies so that you can have the power to decide if you are fully covered we can help you. We will run a policy illustration on any product with living benefits to see if it is the best fit for your price and coverage.

    *This article was written by a licensed insurance advisor.

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