Life insurance is one of those issues many people don’t like to discuss, and it’s not hard to figure out why. Although we call it “life” insurance, most people associate it with the opposite – with death. This is a mistake. Life insurance is a product worth discussing, and it’s one that can help the living, especially with the addition of a living benefit rider.
What are living benefit riders?
A life insurance policy typically pays out when an insured person dies. This payout is called the death benefit. A living benefit rider provides another way for a payout to occur.
If an insured person is diagnosed with a terminal illness, an accelerated death benefit rider allows the insured to receive a portion of the death benefit in advance. This way, the insured can make use of the funds while he or she is still alive. Other riders may allow for payment if the insured is diagnosed with a chronic or critical, but not terminal, disease.
Although the details vary depending on the policy and the insurer, these add-on clauses are increasingly popular in life insurance policies.
How do living benefit riders help?
The traditional death benefit helps the surviving family handle funeral and medical expenses, and it can also be used to provide financial security and protect the estate after the loss of an earner.
However, many policyholders find that they need funds before a death occurs. This is especially true in the case of a prolonged illness, which can result in both expensive medical bills and the inability to earn an income. The ensuing financial hardship adds stress to an already difficult time.
Living benefit riders can alleviate this stress.
With a living benefit rider, policyholders can receive payouts while they are still alive. The payouts allow seriously ill policyholders to focus on their health and on their families, not on their finances. The death benefit will be reduced by the amount paid in advance, but any remaining portion will be paid as a traditional death benefit.
According to the National Cancer Institute, 14 million cases of cancer are diagnosed and 8.2 million cancer-related deaths occur worldwide each year. According to the CDC, approximately 735,000 Americans suffer a heart attack each year, and 795,000 Americans have a stroke.
Talking about death and illness is never easy – but dealing with death and illness is even more difficult, especially if you’re unprepared.
As with any insurance policy, it’s necessary to consider the details of the contract as well as the insured’s unique situation. For many people, living benefit riders make life insurance – already an important product – even more useful.