Living Benefits with Life Insurance

While the death benefit is typically the primary goal with life insurance, you can also tailor your policy with living benefits, which you can access while you’re still alive. Living benefits, also known as accelerated benefits, can be added to life insurance policies as riders. Learning how living benefits work — along with how they affect the different types of policies — can help you determine if a living benefits rider fits your lifestyle goals.

Lindsey Crossmier, writer for RetireGuide
  • Written by
    Lindsey Crossmier

    Lindsey Crossmier

    Financial Writer

    Lindsey Crossmier is an accomplished writer with experience working for The Florida Review and Bookstar PR. As a financial writer, she covers Medicare, life insurance and dental insurance topics for RetireGuide. Research-based data drives her work.

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  • Edited By
    Lamia Chowdhury
    Lamia Chowdhury, editor for RetireGuide.com

    Lamia Chowdhury

    Financial Editor

    Lamia Chowdhury is a financial content editor for RetireGuide and has over three years of marketing experience in the finance industry. She has written copy for both digital and print pieces ranging from blogs, radio scripts and search ads to billboards, brochures, mailers and more.

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  • Published: December 5, 2022
  • Updated: December 20, 2022
  • 5 min read time
  • This page features 5 Cited Research Articles
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APA Crossmier, L. (2022, December 20). Living Benefits with Life Insurance. RetireGuide.com. Retrieved February 3, 2023, from https://www.retireguide.com/life-insurance/riders/living-benefits/

MLA Crossmier, Lindsey. "Living Benefits with Life Insurance." RetireGuide.com, 20 Dec 2022, https://www.retireguide.com/life-insurance/riders/living-benefits/.

Chicago Crossmier, Lindsey. "Living Benefits with Life Insurance." RetireGuide.com. Last modified December 20, 2022. https://www.retireguide.com/life-insurance/riders/living-benefits/.

What Is Life Insurance with Living Benefits?

Living benefits are riders that can be added to your life insurance policy to give you additional benefits to utilize while you’re still alive. Some allow you to access a part of your death benefit or cash value component in order to pay for medical treatments.

Your insurer determines which living benefit riders can be added onto your policy. There are typically options to add living benefits on both term and permanent policies.

What Living Benefits Can Cover:
  • Terminal illness
  • Chronic illness
  • Critical illness
  • Long-term care

Many Americans suffer from disabilities or require long-term care. According to the Department of Health & Human Services, those 65 or older have almost a 70% chance of needing long-term care services in their lifetime. The Centers for Disease Control and Prevention reported that one in four adults have a disability.

Adding a living benefits rider to your life insurance policy can provide you with peace of mind as you age. Keep in mind that the cost for living benefits varies.

Cost of Living Benefits

The cost for living benefits on your life insurance policy varies depending on your insurer. In some cases, a living benefit rider can be added to your policy for free.

Two life insurers, Foresters Financial and Prudential offer accelerated death benefit riders for free on several term, whole and universal policies.

Make sure to confirm the cost of the living benefit rider with your insurer to avoid any unexpected costs.

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Are Living Benefits Worth It?

Whether or not living benefits are worth it depends on your insurer, financial stability and overall health.

If your policy comes with a living benefit rider for free — it would be worthwhile to add it to your life insurance policy. However, if the living benefit rider isn’t free, you should see how much it will increase your premium, and if the policy is still cost effective.

“I am an advocate for living benefit riders and the extra protection they provide,” Steve Rohrig, insurance expert and associate director of training at Senior Market Sales, told RetireGuide. “They really showcase the flexibility of life insurance as being an extra financial resource beyond the traditional death benefit.”

Make sure to consider your overall health as well when trying to decide if living benefits suit your needs. For example, say you’re a 50-year-old woman with a family history of Parkinson’s. You could potentially need long-term care or critical illness coverage later in life. Having a living benefits rider would provide you with additional peace of mind.

“I am an advocate for living benefit riders and the extra protection they provide. They really showcase the flexibility of life insurance as being an extra financial resource beyond the traditional death benefit.”
Steve Rohrig, Expert on Retirement Planning
Steve Rohrig Insurance Expert and Associate Director of Training at Senior Market Sales

Term Life Living Benefits

There are several common living benefit riders for term life policies, including the accelerated death benefit, return of premium and disability waiver of premium. Remember that these aren’t guaranteed to be a rider available with every term policy — your insurer determines what is available on each policy.

Living Benefit Options for Term Policies
Accelerated death benefit
  • Also known as a critical illness rider, this living benefit pays out a portion of your term policy’s death benefit if you develop a terminal illness. The accelerated death benefit can help you pay for medical bills or any debt.
  • Know that rules for the accelerated death benefit vary by insurer. For example, some may charge you interest on the portion of the death benefit that you claim early.
  • Return of premium
  • With the return of premium rider, if you outlive your term policy, all the premiums paid are returned to you. According to the National Association of Insurance Commissioners, return of premium term policies are more expensive than traditional term policies.
  • Disability waiver of premium
  • With this living benefit rider, you can skip your premiums payments without penalty if you suffer from a long-term disability.
  • Make sure that your living benefits are worth the cost when adding them to your policy. Part of the reason why term policies are the most popular is because of their affordability. The return of a premium rider, for example, increases your premium cost, diminishing the main pro of a term policy.

    When asked if the return of premium rider would be a beneficial add-on rider, Steve Rohrig told RetireGuide, “Regarding the return of premium rider on a term policy, I would recommend a permanent plan of life insurance that builds cash value. I feel this gives the policy owner more options.”

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    Permanent Life Living Benefits

    With permanent policies, you have two options to tap into your living benefits — your death benefit and cash value. Your permanent policy doesn’t expire like a term policy does, meaning you have access to living benefits as long as your policy is active.

    Living Benefit Options for Term Policies
    Cash value withdrawal
    With this living benefit, you can access part of your cash value of your policy. Your withdrawal rules vary by insurer and are regulated by federal tax rules, according to U.S. News.
    Policy loan
    You can take out a loan against your permanent policy. Know that you typically don’t have to undergo a credit check with a policy loan.
    Policy surrender
    If you decide to cancel your permanent policy, a policy surrender gives you access to your cash value as a one-time lump sum.
    Long-term care benefits
    This living benefit will cover long-term care costs that aren’t covered by your health insurance or Medicare. Your death benefit will be reduced, depending on how much you borrow. According to the Genworth Cost of Care Survey, long-term care services, like a home health aide, will likely cost around $5,676 a month in 2023.
    Last Modified: December 20, 2022
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    5 Cited Research Articles

    1. National Association of Insurance Commissioners. (2022, June 23). Life Insurance. Retrieved from https://content.naic.org/cipr-topics/life-insurance
    2. Nyerges, S. (2022, April 28). Retrieved from https://www.usnews.com/insurance/life-insurance/when-to-draw-cash-from-life-insurance-policies
    3. U.S. Department of Health & Human Services. (2020, February 18). How Much Care Will You Need? Retrieved from https://acl.gov/ltc/basic-needs/how-much-care-will-you-need
    4. Centers for Disease Control and Prevention. (2018, August 16). CDC: 1 in 4 US Adults Live With a Disability. Retrieved from https://www.cdc.gov/media/releases/2018/p0816-disability.html
    5. Genworth Financial. (n.d.). Cost of Care Survey. Retrieved from https://www.genworth.com/aging-and-you/finances/cost-of-care.html