Many indexed universal life policies include living benefits, which let the insured receive part of the benefit while still alive if diagnosed with a terminal, chronic, or critical illness, according to the terms of the policy.
What Are Living Benefits?
Unlike a policy that only pays out when the insured passes away, living benefits let you advance part of the benefit while you're still alive if you face certain serious medical conditions. The exact percentage and conditions vary by insurer, product, and state.
Terminal illness
May advance part of the benefit if a limited life expectancy is medically certified.
Chronic illness
May help when essential daily activities require assistance or there is severe cognitive impairment.
Critical illness
May apply for serious diagnoses specifically listed in the contract.
Terminal Illness
If a doctor certifies a limited life expectancy, the insured can request an advance of part or, in some cases, the maximum allowed amount of the death benefit. The exact time frame and percentage depend on the state and the policy; they should never be assumed without reviewing the contract.
Chronic Illness
This can apply when the insured is unable to perform at least two basic activities of daily living on their own, or has severe cognitive impairment. The benefit may be paid periodically, subject to medical certification, limits, and conditions.
Critical Illness
This can cover specific diagnoses, such as a heart attack, stroke, invasive cancer, kidney failure, or a major organ transplant. The exact list and amount depend on the contract and the certified severity.
Why This Matters
These benefits can provide access to money for treatment, household expenses, or financial stability during a medical crisis, without waiting for a death to occur. Percentages, covered conditions, and maximum amounts vary; restrictions apply, and some pre-existing conditions may not qualify.
Frequently Asked Questions
Do all life insurance policies include living benefits?
No. It depends on the insurer, the product, and the riders available. It's important to confirm this before taking out a policy.
Does this reduce the benefit for my beneficiaries?
Generally, yes. The amount advanced, plus any applicable charges, usually reduces the death benefit your beneficiaries would receive.
Do I need to pay extra to have living benefits?
It depends on the insurer and the product. Some riders are included at no extra premium, while others have a cost or apply a discount when the benefit is exercised.
Want to check if your policy includes these benefits?
Quote an option that includes them or review your current coverage with a OneSquad advisor.
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