What Is Living Benefits Life Insurance?

Living benefits are most often associated with permanent cash value life insurance. A Permanent or Whole Life insurance policy can do this because they build equity or “cash value. The policy cash value accumulates over the life of the policy. This accumulation of equity, along with tax advantages available with a permanent whole life insurance policy, allows you to have access to living benefits. You can receive a portion of your death benefit in advance, in situations like this.

You can get some or all of your death benefit while you are alive. You can also use your whole life policy cash value to supplement your retirement income without the requirements and limitations that apply to 401(k) and IRA retirement accounts.

If you are terminally ill you can receive a portion of your death benefit in advance, for help with medical expenses, one final around-the-world fling, or whatever. Some policies will also state that you can access your living benefits if you are  chronically ill; you are considered chronically ill if you can’t perform several of the six activities of daily living, such as getting out of bed, feeding yourself, bathing, and so forth. If you are critically ill you may also be able to access your living benefits. For example, you may have been diagnosed with a heart attack, stroke, cancer, end stage renal failure, major organ transplant, or some other pretty grim illness.

Life insurance cash value is one of the few assets not considered in federal college financial aid calculations. Families with college-age children who have permanent life insurance policies not only can use the policy’s cash value (via policy loans) to pay college tuition and housing expenses.

Using these living benefits may have tax consequences, so work with a financial professional and tax advisor to understand your options and determine the best course for your individual circumstances and needs. Your Permanent life insurance is a flexible asset that can add value to your financial plan with benefits you can enjoy during your lifetime.