Unfortunate events can alter your future financial plans. There is a way, though to help protect your plans. Life insurance provides a death benefit to help protect the financial security of your loved ones when you are gone. However, about five years ago, a handful of life insurance companies started developing riders and accelerated benefits that are added to the policies at no additional charge. This means the policy owner can accelerate the death benefit while the insured is still alive and receive some of the death benefit. These living benefits could help you keep control and maintain your financial security. Examples of these riders are:
- Terminal illness – if a physician diagnoses the insured with an illness projecting a life expectancy of 24 months or less to live.
- Chronic illness – if the insured is permanently unable to perform at least two activities of daily living, continence, dressing, eating, toileting and transferring), or if the insured suffers from severe cognitive impairment.
- Critical illness – if the insured has a heart attack, cancer, stroke, major organ transplant and kidney failure are some examples.
Living benefits on a life insurance policy are simply features you can access while you are alive. A national study found that 62.1% of bankruptcies were attributable to major medical expenses. Whether it is a critical illness, a chronic illness or even the terminal illness of a loved one, these tragedies can drain the entire family emotionally and financially. Life insurance was originally designed to provide death benefit protection for surviving family members, but life insurance did not help when an insured was struck down by a debilitating Critical, Chronic or Terminal illness. Multiple companies now offer protection built into life insurance contract for a qualifying illness when people are not able to work and have medical bills piling up. Typically accelerated benefit riders are offered for no additional premium and; however, the accelerated benefit payment will be less than the death benefit because it is reduced by an actuarial discount which is based on the insured’s future expected mortality at the time the benefit is exercised as well as a small administrative fee when accelerated benefits are elected.
Furthermore, policyholder’s are not required to accelerate the death benefit. If the insured became terminally ill and had the financial means to get by, the beneficiary would receive more death benefit if no accelerated benefits were elected. It is important to be aware of the extra benefits you could be receiving for the same cost or less.
If you need help discussing your need for life insurance, you can contact me directly at carter@pacificinsurancegroup.com or 425-246-4222.