Living Benefits
Features in life insurance policies that allow policyholders to access death benefit proceeds while still alive under specific circumstances. These typically include accelerated death benefits for terminal illness, chronic illness, or critical illness diagnoses.
Example
“When diagnosed with terminal cancer, Maria was able to access $200,000 of her life insurance policy's living benefits to pay for experimental treatment and spend time with family.”
Memory Tip
Living Benefits = 'Life While Living' - you can access your life insurance benefits while you're still living under qualifying conditions.
Why It Matters
Living benefits provide crucial financial support during health crises when medical expenses are high and income may be reduced. They can help families maintain financial stability and access better medical care during difficult times without depleting other savings.
Common Misconception
People often think living benefits are free additions or that using them doesn't affect the death benefit. In reality, accelerating benefits reduces the death benefit dollar-for-dollar (plus interest and fees), and some riders may cost extra premiums.
In Practice
A 45-year-old with a $500,000 life insurance policy is diagnosed with terminal cancer with 18 months to live. She accelerates $300,000 in living benefits, receiving approximately $285,000 after fees. This money pays for $150,000 in medical treatments not covered by health insurance and allows her to quit work and spend quality time with her children. Upon death, her beneficiaries receive the remaining $200,000 death benefit instead of the original $500,000.
Etymology
The term emphasizes benefits received during the insured's 'living' years, contrasting with traditional life insurance that only pays benefits after death.
Common Misspellings
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Related Terms
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See Also
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