What are life insurance living benefits?
By Robin Hartill | NerdWallet
Most people buy life insurance to provide financial protections for their loved ones when they die. But some policies offer benefits while you’re still alive. If you purchase life insurance with living benefits, you may be able to access part of your death benefit if you become ill or use its cash value to supplement your income.
What are life insurance living benefits?
Life insurance living benefits are policy features that provide financial protection while you’re still living. There are two main types of living benefits in life insurance:
- Policy riders. A life insurance rider is an add-on to your policy that provides additional protection. Some policy riders allow you to receive part of the policy’s death benefit in some circumstances, like if you’re diagnosed with a serious illness or you need long-term care.
- Cash value life insurance. Permanent life insurance policies have a built-in savings component called cash value that grows over time. You can usually take a loan or withdraw from the policy’s cash value. Some people use their policy’s cash value to supplement their retirement income.
Living benefits in life insurance can provide an extra layer of financial security if you become sick or need an extra source of income. One downside, though, is that living benefits often reduce the policy’s death benefit for your survivors.
Living benefits riders
A living benefits rider is an additional feature in a life insurance contract where the insurer agrees to provide benefits if you’re diagnosed with a chronic or terminal illness, you become disabled, or you require end-of-life care.