The COVID-19 pandemic has rocked the world. With more than 4 million cases and hundreds of thousands of deaths, the crisis has forever transformed the way people think about mortality and how to protect their loved ones.
The need for life insurance has never been as great as it is today. COVID-19 can take the lives of people at any age, even if they have no pre-existing conditions, and some patients leave families behind with no financial support. Life insurance can help you ensure that your loved ones will be financially secure if something happens to you.
When you buy life insurance, you pay a premium to an insurer in exchange for a death benefit paid to a beneficiary after your death. Some policy options also allow you to tap into your coverage while you are still alive. One such option is living benefits coverage, an add-on to a standard permanent life insurance policy.
[content_band bg_color=”#e8f4f8″ border=”all”] [container] [custom_headline style=”margin: 0; 0; 0; 0;” type=”center” level=”h4″ looks_like=”h4″ accent=”true”]Key Takeaways[/custom_headline]
There are two basic types of life insurance. Term life is active for a defined period or until the policyholder reaches a specific age. If you die during that time, your beneficiaries receive a pre-determined death benefit.
Permanent life insurance has no expiration date and may also include a cash value that you can borrow against. In many cases, you can add coverage on top of the standard death benefit using an add-on structure known as a rider.
Living benefit riders, also known as accelerated benefit riders, are policy additions. If you have living benefits as part of a permanent life insurance policy, you can access your death benefit to help cover the costs of a terminal illness, chronic illness, critical illness, or critical injury.
These riders give you two benefit types as part of a single policy:
Your cash benefits come out of your death benefit. They reduce your death benefit but do eliminate it. In addition, you can restore some or all of your withdrawn benefits as long as the policy stays active.
Living benefits are available to policyholders who experience any qualifying medical event and require long-term care. Qualifying events usually fall into one of the following categories.
An insurance commissioner may also approve another illness or injury as a qualifying event.
Long-term care insurance may also provide financial coverage to people with qualifying conditions. However, living benefit riders offer more benefits with fewer restrictions.
A long-term care insurance policy may only pay benefits for two to five years. In addition, your long-term care insurer might raise your premiums after you have purchased the policy. That is unlikely to happen with a permanent life insurance policy, which is designed to maintain stable premium levels throughout the life of the policy.
Long-term care insurance also restricts payments to direct care services, whether you receive those services at home, at a day facility, or in a residential care community.
Most living benefits riders don’t mandate that you use the funds for direct care costs. Policyholders have used these benefits to cover many different expenses, including but not limited to:
If you elect to have living benefits as part of your policy, your advisor will discuss with you how withdrawals will work.
COVID-19 isn’t the only health risk facing people in the United States today.
These health events are costly. Almost 20% of cancer patients spend more than $20,000 a year on treatments. Patients with chronic illness have 10 times more out-of-pocket costs as compared to healthy patients. Nearly half of all stroke patients have to pay for special care long-term.
In total, medical debt drives approximately 530,000 bankruptcy filings every year. It’s impossible to tell how many of those filings would be avoidable with help from living benefits coverage.
For the first time in the modern world, humanity is realizing on a massive scale that life is fragile. The unexpected can happen to anyone at any time.
COVID-19 has proven this point like nothing in living memory ever has, but that knowledge doesn’t have to make you feel helpless. Plan today and protect your tomorrow—both for your own sake and for that of your loved ones.
