Life Insurance With Living Benefits - Ultimate Guide for 2022

Interested in learning about life insurance with living benefits? Read our guide to understand what they are and how they work in 2022.
By Mike Parker
Updated Nov 27, 2022
Two people that have life insurance living benefits
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Most people get life insurance to protect their loved ones after they die. But many don’t consider what their life cover can do for them while they’re still alive. 

Many policies nowadays offer their members living benefits. These are benefits that policyholders can use to handle life’s curveballs, like illness, unemployment, or disability. 

Life insurance with living benefits is becoming a popular option for people who want to get the most out of their long-term coverage. Read on to learn about life insurance with living benefits and determine if it’s right for you.

What Are Living Benefits?

If you’re new to life insurance, you probably don’t know about living benefits. Living benefits are additional features or terms included in life cover. These are known as riders or coverage riders.

By adding terms of coverage to your policy, you can enhance the protection that your policy offers in case something happens.

For example, a chronic illness rider can add one type of living benefit to your term or whole life insurance policy. With this rider, your insurance policy will pay out a specific amount if you fall ill with a covered chronic disease.

Living benefits are a great way for people to ensure that they can provide financial protection to their beneficiaries and get coverage that they can use while they’re alive.

Let’s look at some life insurance companies' common living benefits.

What Are Some Living Benefits I Can Add to My Life Insurance?

There are different types of benefits that you can add to term and permanent life insurance plans. Here are some popular options:

Accelerated death benefit riders

An accelerated death benefit (ADB) rider allows policyholders to get a portion of their death benefit paid out to them before they die.

ADB riders can be helpful if you reach a point where you need money for a significant expense and don’t have the savings to cover the cost. Remember that any money paid out with an ADB is taken from your death benefit and is subject to taxation.

Waiver of premium riders

A waiver of premium rider is designed to protect policyholders who aren’t responsible for paying their policy premiums. With this rider, if the payor of the life insurance contract dies, the future premiums are waived.

For example, let’s say a parent gets a life insurance contract for their son and commits to covering the monthly premiums. If the payor dies and has a waiver of premium rider in their contract, their child’s life insurance contract will continue and no further premium payments are needed.

Long-term care riders

A long-term care rider allows policyholders to use a portion of their death benefit to pay for long-term care costs if they ever need it. Depending on the terms of the life insurance contract, this money can either be paid as a lump sum or in monthly installments over time (typically three years).

Critical illness riders

A critical illness rider allows policyholders to use a portion of their death benefit if they need care for a critical illness that their policy covers.

If you ever fall ill with a covered condition and need cash to pay for your treatment or other bills, your life insurance will pay out a specified amount.

This amount is deducted from your death benefit and can only be used under specific circumstances, so it’s essential to check the details of your policy beforehand.

What Is a Death Benefit?

Your death benefit, or face value, is the money your beneficiaries receive when you die.  Most living benefits will use a portion of your death benefit to fund their features.

Access to cash value

If you have permanent life insurance, a major living benefit is access to a cash value account.

With cash value accounts, policyholders can put additional money aside each month into an account. Once the cash value matures or reaches a certain amount, they can use this money in a couple of ways, for example:

1) Using it as collateral for loans.

2) Emergency funds if you’re needing cash.

3) Investing the amount to grow its value.

Remember that you’ll only get a cash value account if you have a permanent life insurance plan such as a whole life policy, variable indexed policy, or a universal indexed policy.

Return of premium riders

A return of premium rider is a feature of a term life insurance policy. With this rider, a policy will pay back all the premiums paid during the policy term if the policyholder outlives the length of coverage.

For example, let’s say you have a term life policy for 20 years that costs you $250 each month. After 20 years, your term coverage will end, and you’ll be paid back $60,000 (20 x 12 x $250).

Before you think this is a good idea, remember that adding this feature to your term life insurance will significantly raise the premium costs. Additionally, because of inflation, the money you’ve paid over the years will be less than what you would have if you were to invest your cash.

How Much Does Life Insurance with Living Benefits Cost?

The cost of life insurance with living benefits will depend on the type of rider you include in your contract, your risk profile, and the value of your contract.

For example, let’s say you want to add a long-term care rider to a $1 million permanent life policy. The amount you’ll pay for a contract like this will differ significantly from someone who wants to get an accelerated death benefit rider on their $150,000 life plan.

You’ll also need to consider your lifestyle and whether you’re likely to pay higher rates. Insurance companies look at various factors before they accept applications from potential policyholders, including:

  • Your age: If you are older, you can expect to pay more for life insurance as the risk of dying is higher than for younger adults. You can expect to pay more for all types of life insurance as you get older. 

  • Your gender: While this practice is outlawed in certain states, some insurance companies will look at the gender of an applicant to determine their risk profile. Statistically, men have a higher risk profile than women.

  • Your driving history: If you have a lot of traffic tickets, DUIs, DWIs, and other traffic offenses on your record, you’ll likely pay more for insurance. 

  • Whether you use tobacco products: The use of any tobacco products will increase your risk profile for life insurance companies. Depending on the insurance company, they can sometimes categorize vaping as a tobacco product.

  • Your family medical history: If you have a family history of chronic or severe illnesses such as cancer or high blood pressure, you’ll likely pay more for life insurance.

  • Your overall health: If you are in poor physical shape, obese, or generally unhealthy, your insurance company will consider you to be a higher risk to insure than healthier people.

As you can probably tell, there are multiple factors that insurance companies consider when deciding on rates to insure a person’s life.

You can be certain that adding a living benefit rider to your life insurance will cause your rates to go up. 

How Do I Get Life Insurance with Living Benefits?

Adding a living benefit to your insurance policy is straightforward, and you should be able to discuss this with your insurance company or dedicated agent.

Suppose you haven’t got a policy in place already. In that case, you need to contact an insurance agent or insurance company and tell them you’re interested in buying a life insurance contract with specific living benefits. You’ll then have to go through the application and underwriting processes, and your application will either be approved or denied.

What Is Underwriting?

Underwriting is a process insurance companies perform to determine the overall risk of a new application.

During the underwriting process, life insurance companies will go through your medical history, driving history, criminal record, and health profile to decide whether they want to insure you and what you’ll need to pay for coverage.

If you decide that you’d like to add a living benefit to an existing policy, you’ll need to contact your life insurance provider. They will draw up a new life insurance contract with the added benefits, and you’ll sign the new policy.

There are no waiting periods for living benefits. However, your insurance will likely pick up on significant health changes when you apply for living benefits, as you will have to undergo underwriting again.

Remember that life insurance companies reserve the right to revoke your life cover if you are found to have lied about your health status. Be sure to have all of your paperwork in order and be ready to undergo a medical exam if your current life insurance company requires it.

Life insurance with living benefits should be easy to get if you work with an experienced insurance agent. If you don’t have one already, reach out to us at 1-888-912-2132 or to get in touch with a licensed insurance expert today.

What to Consider When Choosing A Life Insurance with Living Benefits

Before you add a living benefit to your life insurance, it’s essential to do research and make sure that the decision is right for you. Here are some tips you can follow to figure out if you should get living benefits.

Tips for Deciding on Living Benefits

  1. Consider all your financial obligations and risks if you’re considering life insurance with living benefits. 

  2. Talk to your family, friends, and beneficiaries and see what they think about adding a living benefit to your life cover. Also, ask your financial advisor or insurance agent for their opinion.

  3. Think about the risks you may face in life. If you have a family history of illness or work in a high-risk profession, adding a critical illness rider or an AD&D rider is a smart choice.

  4. Look at what it will cost you to add a living benefit to your existing life insurance policy. Or, if you don’t have life coverage, find out how much more you’ll need to pay to add a living benefit to a policy.

Tips for Choosing a Life Insurance Company

  1. Do your research: Life insurance is a long-term commitment, and doing your homework beforehand can save you time, hassles, and stress. 

  2. Work with a life insurance agent: Life insurance professionals have experience and knowledge which can help you navigate complicated terminology and different plan types.

  3. Look at what other people say about your preferred provider: Speak to your friends and look at online reviews of insurance companies to see how they treat their members.

  4. Get a few different quotes: If you’re working with an insurance agent, ask them to get quotes from three to four companies to compare your options. If you’re looking at life insurance on your own, use an insurance marketplace, like PolicyScout, to see your options.

If you’d like to find out which providers offer life insurance with living benefits in your area, speak to one of our agents today.

Where Can I Learn More about Life Insurance?

Getting life insurance with living benefits is an ideal way to increase your coverage for specific events. Adding living benefits can also add peace of mind for you and your beneficiaries as you go through life.

There are various living benefits that you can choose from, so be sure to do your homework and speak to a qualified expert about your options before you commit. We have a team of expert life insurance agents to help you navigate your life insurance decisions. If you have any questions or want to look at options in your state, reach out at 1-888-912-2132 or today.

We also have loads of life insurance articles that cover costs, benefits, enrollment, and terminology. Head over to our life insurance hub today to read our latest guides.