Most people typically think of life insurance as “death insurance,” which can be defined as, proceeds that are paid to the beneficiary(ies) only when the insured dies. Life insurance has evolved, we call it “life” insurance for a reason. Your policy can also provide income to the insured when he or she needs it most while they are still living. 

A frequent question many people ask about life insurance is, “What’s in it for me if I don’t prematurely die?”  Understanding your living benefits and how you can utilize them while you are alive is a great way to take advantage of the different aspects of your policy.

Typically, there are four or five living benefits to a life insurance policy:

• Cash accumulation that can be used to supplement your income as a lump-sum distribution, monthly income or a combination of both.
• Later in life when you still may have a need for life insurance protection, but not as much as you initially required, you can request that your policy become reduced paid-up life insurance. Reduced paid-up life insurance is designed with a guarantee that you will never have to pay another premium.
• You may also opt-in to a combination of both. Receive a cash value to supplement your income and a reduced paid-up life insurance policy.
• If the insured is diagnosed as terminally ill, they have the option to receive almost all of their life insurance death benefit while they are still alive.
• In the event, one becomes chronically ill, the individual could receive (accelerate) the death benefit to help offset the expenses associated with the chronic illness.

How living benefits impact each type of life insurance policy?

It is also important to understand that each type of life insurance policy we offer has an array of living benefits that you can enjoy while alive. A living benefit is a chance for you to take advantage of your policy while using it to help pay off your mortgage or mark something off of your bucket list.

What are the living benefits of a term life insurance policy?

Term insurance is designed to provide the greatest amount of death protection to the beneficiary(ies) for the least amount of premium. For example, a male that is 40 years old and a non-tobacco user’s annual premium for $250,000 of death protection is slightly greater than $1 a day!

In addition, it offers the living benefit that if the insured is diagnosed with a terminal illness the insured could receive (accelerate) almost all their death benefit while living. The insured can become the beneficiary of their own life insurance policy, utilizing it however they need or want to.

What are the living benefits of a return of premium life insurance policy?

Return of premium life insurance is a policy that offers protection for either 20 or 30 years and you select how long you need the coverage. 

There are multiple living benefits associated with a return of premium life insurance policy:

• The insured could request and is guaranteed to receive all of their annual premium dollars back after 20 or 30 years, income tax free.
• Another option is the insured could select after year 15, 20, or 30, to be guaranteed to never pay another premium and have a reduced paid-up life insurance policy.
• Or, the insured can request a combination of both. At the end of year 15, 20 or 30, receive income tax free dollars to supplement your income and a reduced paid-up life insurance policy guaranteed to never require another premium payment.
• Just like term insurance, if the insured is diagnosed with a terminal illness almost all of the death benefit could be accelerated while living, when they may need it most.   

What are my living benefits of a whole life insurance policy?

Whole life insurance offers protection that remains in force for life, with reasonable premiums, and offers all the living benefits that term and return of premium life insurance provide. However, in addition, did you know: 

• Whole life insurance can offer the acceleration of a death benefit for chronic illness. This can be utilized to offset the medical expenses associated with chronic illnesses.
• 63% of adults above the age 65 have two or more chronic conditions.¹
• 75% of U.S. healthcare spending is a result of chronic illness care.²
• Or, the acceleration of the whole life death benefit can be used for any other personal need the insured might have. It is the insured’s money, to use however, they want or need to.

   

How do I know if I qualify for living benefits?

The greatest value provided by the living benefits of life insurance is that most are determined by the insured. The insured can adjust the life policy to address their current and specific stage of life.

Is the need for life insurance protection not as great as it was initially? If not, request a reduced paid-up life insurance that will never require you to pay a premium on your policy again.

Perhaps you want to receive cash to supplement income? Regardless, if it is a lump sum or monthly income there is no qualification. The insured can surrender the policy if they determine there is no longer a need for life insurance protection and receive the cash value that has accumulated, utilizing the cash for their current stage of life.

Or, the insured could request both. They could receive cash to supplement income and reduced paid-up life insurance.

However, if an individual needs to utilize their policy for a terminal or chronic illness, a physician’s diagnosis is required prior to accelerating the death benefit to the insured income tax free.

Who can I talk to, to learn more?

First, you will want to contact your Indiana Farm Bureau Insurance agent or find an agent online to talk to. They will help you figure out what is important to you. Your agent will assist you in exploring all the benefits of life insurance, the living benefits as well as the death benefit. We understand how to protect your present and your future, your loved ones and yourself!

1. Centers for Disease Control and Prevention. Leading causes of death and numbers of deaths, by sex, race, and Hispanic origin: United States, 1980 and 2014 (Table 19). Health, United States, 2015.  https://www.cdc.gov/nchs/data/hus/.

2. U.S. Department of Health and Human Services. Multiple Chronic Conditions—A Strategic Framework: Optimum Health and Quality of Life for Individuals with Multiple Chronic Conditions. Washington, DC. 2010. Accessed July 26, 2018.

*The information in this article was compiled from a variety of sources and is intended to provide helpful tips only.