Introduction
Life insurance is typically associated with providing financial protection for loved ones after the policyholder’s death. However, many people wonder if it is possible to use their life insurance while they are still alive. In this article, we will explore the various ways in which life insurance can be utilized during the policyholder’s lifetime.
Living Benefits
Living benefits are a feature offered by some life insurance policies that allow policyholders to access a portion of their death benefit while they are still alive. These benefits are designed to provide financial support in the event of a serious illness or medical condition. The specific conditions under which living benefits can be accessed may vary depending on the insurance provider and policy terms.
Accelerated Death Benefit
One common form of living benefit is the accelerated death benefit. This allows policyholders who are diagnosed with a terminal illness to receive a portion of their death benefit early. The funds can be used to cover medical expenses, experimental treatments, or simply to improve the quality of life during the remaining time.
It’s important to note that accessing the accelerated death benefit may have an impact on the total death benefit that will be paid out to the policyholder’s beneficiaries upon their passing. The amount received as an accelerated death benefit is typically subtracted from the total death benefit.
Long-Term Care Riders
Another way to use life insurance while alive is through the inclusion of a long-term care rider. This optional add-on to a life insurance policy provides coverage for long-term care expenses, such as nursing home care or in-home assistance, in the event that the policyholder becomes unable to perform certain activities of daily living.
The long-term care rider allows policyholders to tap into their life insurance policy’s death benefit to cover these expenses. This can be particularly beneficial for individuals who do not have a separate long-term care insurance policy or who prefer the flexibility of using their life insurance benefits for this purpose.
Policy Loans
Some life insurance policies, such as whole life or universal life insurance, accumulate a cash value over time. Policyholders have the option to borrow against this cash value through policy loans. The loan amount is typically limited to a percentage of the cash value and accrues interest.
Policy loans can be used for any purpose, whether it’s to cover unexpected expenses, finance a major purchase, or supplement retirement income. It’s important to note that policy loans are not free money and need to be repaid. If the policyholder passes away before repaying the loan, the outstanding balance will be deducted from the death benefit.
Conclusion
While life insurance is primarily intended to provide financial protection for loved ones after the policyholder’s death, there are ways to utilize life insurance benefits while still alive. Living benefits, such as accelerated death benefits and long-term care riders, offer policyholders the opportunity to access a portion of their death benefit to cover medical expenses or long-term care needs. Additionally, policy loans can provide a source of funds for various purposes, although they need to be repaid.
It’s important to review the terms and conditions of your life insurance policy and consult with your insurance provider to understand the specific options available to you for using your life insurance while alive.
References
– www.lifehappens.org
– www.insurance.com
– www.investopedia.com
