Live It Up: How Do Living Benefits Work?

Each day, about 8.78 of 1,000 people are dying. While this is a fact of life, you might want to know how to protect your family when it’s your time. Or, how to protect yourself if you become sick.

Thinking about the future and your family’s income might seem overwhelming, but there’s hope. Read on to explore all about living benefits, what they are, and how they’ll benefit your family.

What Are Living Benefits?

Living insurance benefits allow you to build cash value within your life insurance policy. It can keep building over a lifetime. It allows you to use the money while you’re still alive.

Under living benefits, you have term life insurance. This covers you for a certain period of time. Your beneficiaries will receive living needs benefits for a certain period of time.

There’s also what’s known as an accelerated death benefit. This is where you receive a portion of your term life policy if you ever suffer from a terminal illness. It’ll pay for debt, medical expenses, etc.

Keep in mind that each insurer might have different rules when it comes to this. Policies might also need to be in effect for a certain period of time before you can use them.

Interest on a portion of the death benefit might occur as well. Keep in mind that the amount that you receive will be deducted from the amount that your beneficiary will receive later on.

Permanent Life Living Benefits

Permanent life insurance will allow you to collect cash values on a tax-deferred basis. Term life insurance doesn’t allow you to do this.

One option can be a cash-value withdrawal. This is where you’ll have a portion of the cash value of your permanent life policy.

The great part is that you won’t owe taxes on this withdrawal either in certain circumstances. This can include when the amount is less than or equal to your premium payments. You will owe taxes if any of the amount is from dividends, interest, or capital gains.

A living benefit rider is where you’ll be guaranteed money while you’re still alive. Whereas, death benefit riders protect your beneficiaries against declines in contract values. Contract values can normally change due to market conditions.

Rider Costs

Riders reduce the value of the contract every year. There might be an annual fee of 1% of the contract value.

This fee is based on an annual basis, not on the performance of the contract. If you’re the contract owner, then you can count on the return of the principal in the contract.

Understanding How Living Benefits Work

After exploring this guide, you should have a better idea of how living benefits work. Take your time deciding if they’re the right choice for you and your family’s future.

Would you like to read more informative articles with your future in mind? Be sure to check out our other articles today.