Life insurance is not a topic that most people spring to think about. However, making a plan to care for your loved ones after you die is something a family should do together. Life insurance helps cover the unexpected cost of funeral arrangements and outstanding debt, but it can even help pay for some expenses while you are alive. You may be able to access the death benefits portion of your life insurance policy if you have a qualifying health condition. Bankrate has put together this guide on living benefits to help you understand what additional options are available when shopping for life insurance.

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What are living benefits in life insurance?

Living benefits are exactly what they sound like: benefits in a life insurance policy that you can make use of while you are still alive.

Some life insurance living benefits come built into policies, but many have to be attached to the coverage with a rider. These riders often give you more protections, but you will typically pay an additional premium to have them included in your policy.

Not all living benefits work the same way. To help you determine if life insurance with living benefits is right for you, you should be aware of some of the most common options.

Types of life insurance living benefits

There are many types of living benefits offered with various life insurance policies. Below are some of the most common types of living benefit options.

Cash value

If you buy a permanent life insurance policy (as opposed to a term policy), a portion of your premiums will go into an account that builds cash value over time. The type of permanent policy you purchase will determine how the money grows over time.

Regardless, you have the option to use that cash value while you are still alive. Here are some options that may be available to you.

  • Insurance premiums: You could use your earned cash value to pay your premiums if you have accrued enough.
  • Loan: You could use your cash value as a loan. You will need to repay that money and any applicable interest, or it may be deducted from your death benefit.
  • Complete surrender: You have the option to completely surrender your policy to get your cash value as a lump sum. If you exercise this option, you will lose your death benefit for your beneficiaries and any other life insurance living benefits attached to your policy.
  • Policy conversion: Some policies allow for policyholders to convert cash value into an annuity or a different kind of life insurance policy.

There may be restrictions on how and when you can use the cash value in your policy. For example, you may have to wait until your policy has been in place for a certain number of years before you are able to access your cash value.

Accelerated death benefit riders

Also referred to as a critical illness or a terminal illness rider, you can generally add an accelerated death benefit (ADB) rider to both permanent and term policies.

If you buy life insurance that includes an ADB, certain qualifying events would allow you to access some of your death benefit before you pass away. Each company has its own qualifying events and some include:

  • Terminal Illness with short life expectancy
  • Permanent disability
  • Organ transplant
  • Certain stages of cancer
  • Paralysis
  • Coma

Using accelerated death benefit riders would lower the death benefit on your policy. You could use the money when your family needs it, but any death benefits taken early will generally reduce the amount your beneficiaries receive when you pass away.

Other types of living benefits

There are additional types of living benefits that can be added to life insurance policies. Although this is by no means an exhaustive list, these additional riders are also frequently offered by life insurance companies.

  • Return of premium riders: With a term policy, if you do not pass away before your policy expires, you will not receive any kind of policy payout — unless you have this rider. You would pay more for a term policy with this option, but if you do not pass away before the term expires, you’d get back the premiums that you paid into the policy.
  • Disability waiver of premiums rider: With this optional rider, if you are diagnosed with a long-term disability (usually one that lasts six months or more), you would not need to pay your premiums while the disability persists.
  • Long-term care benefits (LTC) rider: Usually reserved for permanent policies, this living benefit rider allows you to use some of your death benefit to cover the cost of long-term care.

Frequently asked questions

    • The cost of life insurance varies due to several factors. The amount you will pay depends on your individual features, like your age, your health and even your hobbies. Additionally, if you buy a term life insurance policy, you will often pay less than if you buy a permanent policy. Riders, such as the living benefits riders discussed above, usually add an additional amount to your premium as well.
    • It depends on your budget and your anticipated needs. The living benefits you may want to add depend on your risk tolerance and your ability to pay more. With more life insurance living benefits, you and your loved ones would have more options to use the policy while you are living. However, those additional protections often mean higher premiums.

    • There is a chance you could pay for life insurance living benefits you never use. But there is also a chance you could face a serious illness or disability and find yourself wishing you had the extra coverage in place.

      To help you decide if living benefits are the right choice for you and your loved ones, consider talking to an experienced life insurance agent or broker.