Living Benefits of Life Insurance

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  • Post last modified:December 1, 2019

Life insurance is always known for death benefits. It has no fruitful benefits for the person who is purchasing but is an advantage for the beneficiaries.

Well, have you ever thought about the living benefits of life insurance?

Yes, there are many living benefits too. It enables a person to take the cash while they are alive.

Just take a deeper look into it. You can pay the college fees, plan your retirement plan or even invest in property or business too.

Therefore, we have dedicated this article for defining the detailed benefits of life insurance and other things that you must know about it.

What are Living Benefits?

Many people who seek life insurance are unaware of living benefits. Benefits are provided before death as a different purpose. If you will ask your policy provider, they can tell you about many options for collecting your cash during your life.

Some companies deduct the amount from death benefits while others have different policy and benefits are provided separately on different conditions.

What else a person needs in life other than financial security? Living benefits offer you everything that you can take advantage of in your life.

It can be a study plan for kids, as an asset for loans, a retirement plan can also be convenient if planned right. Therefore, living benefits are for the ones who seek the capital in their life and want to fulfill their dreams without going broke.

So, it is for the ones who are alive and want to pursue their dream with full potential. Any dream needs investment and these benefits with an insurance policy can be a savior for them. If you want the living benefits, keep in mind that every company has different conditions for the policy.

Death Benefits vs. Living Benefits

Death BenefitsLiving Benefits
1. Death benefits of life insurance are only accumulated after the death of the policy owner.1. Living benefits are provided while a policy owner is alive.
2. The cash is collected by the beneficiary and is mostly used for the funerals and any payable loans or funds of the owner. 2. One gets tax-free access to the cash value.
3. The beneficiary needs to provide a death-proof to the company before collecting the cash.3. Living benefits will contribute to your financial security ensuring your financial goals.
4. Usually, death benefits are tax-free, depends on the state or region. 4. It can be used as an asset for loan security, and one can avail many benefits of life insurance being alive and healthy.

Overall, both have their benefits and conditions that may vary as per the policymaker or the state laws. But both are offered to reduce your financial stress and take share the burden of financial responsibilities by saving you from going broke. 

What is Accelerated Death Benefit?

We know death benefits in detail, but do you know about the accelerated death benefit?

The accelerated death benefit is also known as ADB is a benefit that comes attached with life insurance policy and a policyholder can receive cash in advance if diagnosed with a terminal illness (which will be explained later in the article).

Mostly, people who have fewer years to live and also fewer finances to take the treatment – they use this benefit. The accelerated benefit is important for elderly people. You are growing old, and your medical condition can take a drastic turn.

In this case, this benefit can be an advantage for an ill person.

How Does it Work?

The trend of having an ADB started back in the 1980s. A person could easily manage daily living expenses and also secured the future of the people he is leaving behind. “Living benefits rider” is another name for it.

To avail of this benefit, a person needs to provide medical proof of their terminal or chronic illness. The company will dig up more for further investigation and you will be approved.

Remember, it will reduce the number of beneficiaries. Given that; ADB is approved on the diagnosis of terminal illness, or if you need an organ transplant and if you need financial assistance with daily activities. All of this is available on certain conditions of the policy that are usually decided at the time you are purchasing a policy.

So, if you need it you will have to provide the proof and agree to the given terms and conditions which also includes a reduction in the amount due to a beneficiary.

Term Life Insurance with Living Benefits

Term life insurance is the one for the protection of your business, loved ones, and land. It is maintainable and affordable too. And of course in simple term life insurance, you cannot get the cash before the death and it will be passed on to the beneficiary of the policy.

However, there is another way to get the loving benefits of insurance. But, then it is only granted to the ones with a terminal illness.

If your lifespan is short and you need money for the treatment. Term life insurance that offers living benefits is the top choice. Concerned companies will do the complete inspection and will require medical proof of the illness to provide this offer.

Moreover, it is dependent on the state and there is also a limitation to the benefits regarding frequency and amount of cash. Again it varies as per the company policy and state laws on the insurance policy. Fees are another factor that counts as it will be charged according to the company’s interest rates.

Permanent Life Insurance with Living Benefits

Well, permanent life insurance doesn’t offer living benefits. But, it has a lot to offer.

It is not only about protecting your loved ones after your death. It is beyond the risk protection. This type of life insurance goes throughout life until you are paying your premiums.

It is the best insurance for protecting your assets and benefitting your financial goals and other dreams of life. It offers you the lifetime guarantee of financial support including unique and worthy tax advantages.

Few Other Benefits

The advantage of permanent life insurance doesn’t end here as it comes with many other advantages too. If you want a deeper insight into it, the following are the few that you must know before purchasing life insurance.

  • Tax Advantage: Cash value grows in a tax-advantaged way.
  • Flexible Capital Plan for Retirement: You can get a sound amount as an income at the age of retirement.
  • College Fees: This can be another ideal plan for paying college fees for your kid or yourself.
  • Lifetime Care: It offers your lifetime benefits, imagine having financial support from college fees till the time of retirement.

Isn’t it great having all the benefits for the lifetime, and you can pursue your dreams without going broke or feeling a burden of life?

A load of life is heavy at times and insurance in one way to reduce the burden of planning by planning your finances right.

Who Can Get Living Benefits?

We have talked about term life insurance and permanent life insurance. Mainly, both are helping people in catering their basic needs including medical bills, daily expenses, and business loans or even college fees, etc. they are different in benefits and other levels, but the core aim of both is to offer benefits.

It also shows that living benefits are for the people who want coverage for unexpected events of life. It is a benefit taken at the time of severe illness that reduces your life span and you need capital for the medical treatment.

So, anyone with the chronic illness, terminal illness or critical illness can avail this facility from the life insurance policy.

Conditions can vary as per the policy and level of illness. But if you look at the bigger picture, it is just beneficial when life hits you hard. Yes, at the very moment, life insurance can be your savior.

How Much Can You Get?

Usually, life insurance will pay between 25-100% of the total death benefit as a living benefit. But, the procedure involves the limit of the dollar too. Remember that you can use this benefit only once.

Once you have taken the living benefit, you won’t be able to take it for another time. So, understand your policy and read it carefully. Know about the percentage your policy provider company will offer under these circumstances.

Also, remember that if you take 50% of the living benefits from the death benefit, your beneficiaries will only receive 50% of it after your death. So, before purchasing a plan, think if it suits you and your family or not.

In the end, it is up to you and the choice you make while purchasing a policy. Be clear about your requirements and ensure the right decision at the right time.

Is There Any Tax Involved?

Typically, no tax is involved with living benefits, but it is dependent on the state. One thing that you need to know is if you are paying proceeds as a lump sum, one-time payment – there is no tax.

However, if an insurer is paying premiums in installments, there will be an interest in it too. Mostly, parents request the payment to be done in installments if their children are young. So, the beneficiary will have to pay an income tax on it.

Moreover, taxes on living benefits have different policies set by every other company. The policy owner is viewed as a beneficiary and further formalities are done keeping it in mind.

So, you may have to consult your insurance company before purchasing a policy with living benefits. It is all dependent on the policymakers and their terms and conditions.

Is There Any Processing Fee?

The processing fee is always there while you purchase a policy plan. It may vary as per the plan and company too. There are different types of processing fees. It can be monthly funds, premium loads, admin fees, expense risk charges, termination fees, fund management fees and the cost of insurance is a must.

Other than that you must read out the policy carefully and understand every clause of the contract to know the full and final charges, fees or interest of the policy.

Every company has a different policy about charging for a process and one must agree to their terms for purchasing life insurance. As far as the living benefits are concerned, you might have to face some deductions to carry out the process.

Dealing with Illness Using Living Benefits of Life insurance

Living benefits has only one purpose and that is all about catering to any person who is diagnosed with the illness. Life insurance is especially for the ones who have a few years left to live and need medical coverage for all the medical expenses.

The percentage given against the death benefit can go from 25% to 100%. It is all up to your decision and the way you want to proceed.

However, to qualify for the living benefits, one needs to prove any of the following medical conditions for it.

Chronic Illness

Chronic illness is defined when a patient is unable to perform daily routine activities.

Six activities that include:

  • Dressing
  • Transferring
  • Bathing and showering
  • Toileting
  • Self-feeding
  • Continence

If the patient is unable to perform these activities, you can get the payout against the death benefit. It can cover the medical bills and the fees of caretakers.

Terminal Illness

Terminal illness is usually referred to as the incurable disease. Cancer or heart advanced diseases are most common in terminal illness. In this case, a policyholder can avail of the living benefits and pay the hospital bills accordingly.

If the patient is expected to die within a year, the life insurance is paid in terms of a terminal illness. Usually, it has no extra cost, but the policy can differ as per the state or company.

Critical Illness

Critical illness is typically cancer, heart attack, stroke, paralysis, blindness, and other similar diseases. The list can differ according to the company’s policy. You need to understand the policy before seeking the living benefits of the policy.

With critical illness, you will be given the advantage to cover the cost of medical treatment. Therefore, before signing the policy, you need to understand every aspect of it.

If you are purchasing life insurance, make sure you have a complete understanding of the conditions that qualify you for the living benefits.

Covering Medical Bills

You might be wondering what it will cover the medical bills or not?

Well, it is easy to understand that living benefits will never disappoint you. If you will qualify for the benefits, you can always get the benefit of covering the medical bills. The cost limitation can vary as per the company policy. All you need to know right now is to ensure know the conditions of your policy plan.

Also, one needs to provide medical records to qualify for such benefits along with the claim of insurance. The company representative will guide you throughout the process. Still, you can confirm the process at the time of purchasing.

Therefore, the payout is only given if your illness is medically proved. You are ineligible to claim the insurance of you fail to provide the right medical proofs. Companies do not rely on your documents, and they will inspect the whole matter on their behalf to ensure the security of policy payment.

The best way is to keep a copy of all the records of your patients and bills you have paid in the hospitals. Claim the policy and you will get your insurance as soon as possible.

Living Benefits Rider Worth It

Living benefits rider is the form of policy offered by different companies so; the insurer can take advantage of the insurance in their life. There are different conditioned that are already offered by the company and you can use them as add-ons of life insurance. These riders make your policy an easy deal with customized options.

We are living in a digital era, and everything is tailored here. So, why leave the life insurance behind?

The question is that if it is worth it or not?

Your concern is understandable, and we are here to offer you the top advantages of living benefits rider here;

  • It can cover the expenses of an accident or sudden injuries.
  • Some companies offer child rider benefit for the little ones added in your family.
  • You can get more than half the amount of the policy to cover the expenses of the financial burden of any chronic, terminal or critical illness.
  • Coverage for any unexpected events of your life.
  • You can pay a college fee through it.

You all can agree to the point on it that financial security in life is a different kind of relief. Life is full of surprises, and it can leave you with severe traumas or overload of expenses.

At that time, life insurance and along with the living benefits can be your savior for any unexpected turns of events in life.

Therefore, you need to plan ahead of the time to ensure the safety of your health or the future of your kids.

This is the one finest way to secure the future and live your life like you don’t care because you have taken care of the possible situations in advance.

Senior Life Insurance with Living Benefits

Seniors or elderly of the house are the people who have their life on the edge. It is common for them to catch diseases or accident occurrence.

To cover their medical expenses, living benefits is important. It is for them to understand at the time of signing the policy. One can add the riders for accidental death, childcare, chronic care, disability or terminal illness.

These are common issues and the chances of happening them with any senior person are quite common.

Why Living Benefits is Important for Seniors?

It is an essential and crucial matter for seniors. They might not have any children or their kids can lack financial stability. Therefore, in the case of an accident or any unfortunate event, they can easily avail of the living benefits.

Your age can restrict you from getting a policy. Mostly, life insurance for seniors over 85 requires a lot of formalities, but if you want to make your retirement comfortable and convenient, you need to buy life insurance that offers living benefits.

The coverage of accidental death will become easy for their kids or any beneficiary. This is the one way to offer your love to your children. You won’t be a burden on anyone if you will have the facility of availing living benefits.

Some conditions can vary according to the type of insurance you are buying. Your plan will determine everything that you can get through the policy. You just need to have enough knowledge and be clear about the needs of your home.

Also, how much it is important to provide insurance money to your beneficiary. Decide the percentage accordingly. It is not easy for parents to take this decision, but it is the last gift that you can give to your children.


Life insurance riders are beneficial for everyone as they reduce the burden of kids after or even before the death of their parents. Regardless of how much a child can spend, parents can take a breath of relief that they are not dependent on them.

More importantly, it gives you a stress-free life. The living benefit is the best way to save your future by all means. In the end, it is only about securing the future by making better and worthy plans for it.

Linda Chavez

I'm a burial & senior life insurance expert, independent agent, Founder & CEO of Seniors Life Insurance Finder. I have been working in this sector since 2004 and established my own company in 2014. I have a team of seven members, and we are trying hard to share the knowledge we've gathered. We know how difficult often it is to find an affordable policy. Hence, we are doing our best to help you.