Life Insurance

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The Importance of Life Insurance (with a Living Benefit)

When most people think about life insurance, they envision a financial safety net that protects their loved ones after they pass away. While that death benefit remains a crucial component of any life insurance policy, modern policies have evolved to offer something equally valuable: living benefits. These provisions are transforming life insurance from a single-purpose product into a comprehensive financial planning tool that can serve you both during your lifetime and after you’re gone.

What Are Living Benefits?

Living benefits, also called “accelerated death benefits” or “living riders“, are provisions in life insurance policies that allow policyholders to access a portion of their death benefit while they’re still alive under specific qualifying circumstances. Rather than waiting until death to distribute funds to beneficiaries, these benefits recognize that serious health events or chronic conditions can create immediate financial needs that shouldn’t be ignored.

The concept emerged from a compassionate recognition that people facing terminal illnesses, critical health diagnoses, or debilitating chronic conditions often face mounting medical bills, lost income, and the need for specialized care. Living benefits provide a way to tap into the policy’s value when it’s needed most, offering financial relief during life’s most challenging moments.

Types of Living Benefits

Most modern life insurance policies offer living benefits that can be triggered by three main categories of health events. Terminal illness riders allow policyholders diagnosed with a condition expected to result in death within a specified timeframe (typically 12 to 24 months) to access their death benefit early. This gives individuals the financial freedom to focus on their remaining time with loved ones, pursue bucket list experiences, or cover end-of-life care without depleting family savings.

Critical illness riders become available when a policyholder is diagnosed with a serious condition such as cancer, heart attack, stroke, organ transplant, or kidney failure. These diagnoses often require extensive treatment, time away from work, and lifestyle adjustments that create significant financial strain. Accessing life insurance funds during this period can help cover medical expenses not fully covered by health insurance, replace lost income, or pay for experimental treatments that might not otherwise be affordable.

Chronic illness riders address long-term health conditions that severely impair a person’s ability to perform daily activities independently. When a policyholder can no longer perform two or more activities of daily living (such as bathing, dressing, eating, or moving around) without assistance, or requires substantial supervision due to cognitive impairment, they may qualify to access their death benefit. This provision is particularly valuable for funding long-term care, whether at home, in assisted living, or in a nursing facility.

The Financial Protection Gap

Traditional financial planning often creates a dangerous gap. People diligently save for retirement and purchase life insurance to protect their families, but they frequently overlook the financial devastation that can occur when serious illness strikes during their working years. Medical bills can quickly spiral into six figures, especially when treatments extend over months or years. Health insurance deductibles, co-pays, and out-of-network expenses add up rapidly, and many treatments or medications may not be covered at all.

Beyond direct medical costs, serious illness often forces people to reduce work hours or stop working entirely, cutting off the household income precisely when expenses are climbing. Spouses or family members may need to become caregivers, further reducing household earnings. Without living benefits, families facing these circumstances are often forced to drain retirement accounts (incurring penalties and taxes), liquidate investments at inopportune times, or accumulate crushing debt.

Why Living Benefits Matter

Living benefits transform life insurance from a passive policy into an active financial resource that adapts to your needs. This flexibility provides peace of mind that extends far beyond death benefit protection. Knowing you have access to funds if you face a serious health crisis reduces financial anxiety and allows you to make healthcare decisions based on what’s best for your health rather than what’s cheapest.

The emotional and psychological benefits cannot be overstated. When facing a terminal diagnosis, the last thing anyone wants to worry about is whether they can afford their remaining time or whether their treatment costs will bankrupt their family. Living benefits provide the freedom to focus on what truly matters: spending quality time with loved ones, pursuing meaningful experiences, and making the most of whatever time remains.

For chronic illness scenarios, living benefits can preserve retirement savings that might otherwise be depleted by years of long-term care costs. Long-term care insurance has become increasingly expensive and comes with strict qualifications, making it inaccessible for many people. Life insurance with chronic illness riders offers an alternative funding source that’s typically more affordable and easier to obtain while you’re healthy.

Making an Informed Decision with the help of an Afore Insurance Advisor

When evaluating life insurance policies, it’s essential to understand what living benefits are included and what conditions must be met to access them. Some policies include living benefits at no additional cost, while others offer them as optional riders that increase premiums. The percentage of the death benefit you can access while living varies by policy, as do waiting periods and other restrictions.

Consider your overall financial situation, family health history, and risk tolerance when deciding how important living benefits are for your coverage. If you have substantial savings and comprehensive health insurance, you might prioritize maximizing your death benefit. However, if serious illness would create immediate financial hardship, living benefits might be invaluable.

Conclusion

Life insurance with living benefits represents a more holistic approach to financial protection.

Rather than planning solely for the inevitable end, these policies acknowledge that life’s journey can present financial challenges that require immediate resources. By bridging the gap between traditional life insurance and long-term care planning, living benefits ensure that your policy serves you and your family whenever protection is needed most.

As you evaluate your insurance needs, consider how living benefits might provide the comprehensive coverage that adapts to whatever life brings your way. Contact the team at Afore Insurance Group for a comprehensive life insurance needs analysis.

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