Living Benefits have increasingly become common on most types of life insurance, but they are not all created equally. However, the Living Benefits on our IUL carrier policies are very powerful. Let’s examine what the Living Benefits are, and what they are not.
Living Benefits will accelerate a portion of the policy's death benefit when an insured has a qualifying terminal, chronic or critical illness. There are “triggering” events that give rise to the benefit and they will vary by carrier, but normally include triggers such as heart attack, stroke, and cancer to name a few. The amount of the benefit available is determined based either upon a stated percentage of the death benefit, or the age of the insured at the time of claim, and the severity of his/her condition. Benefits vary greatly by carrier and generally can be accessed in part or in total. These benefits are included on our carrier IUL products at no additional cost.
Terminal Illness is usually defined as having a medical diagnosis of 12 months or fewer to live. Some policies will cover a diagnosis of 24 months or less. The benefit usually ranges from 80-90% of the death benefit and can be taken in part or in total.
Chronic Illness is a benefit triggered by the insured's inability to perform 2 of the 6 activities of daily living: bathing, eating, dressing, transferring, toileting and continence. Depending upon the carrier, the benefit can be up to 50% of the death benefit, or 2% of the death benefit with a discount based on age at the time of the claim, or some other similar formula. It is not a true Long-Term Care rider or coverage but it can be used to supplement costs associated with a chronic illness, including paying a family member or neighbor for assistance.
Critical Illness means a portion of the death benefit can be accelerated for a qualifying critical illness like a heart attack, cancer, stroke, and other dread diseases. With the advance of modern medicine, many people survive these types of illnesses, yet they may miss numerous paychecks as they go through treatment and recovery while bills and debt can stack up. Critical Illness benefits can help individuals stay current with household expenses and medical co-pays during the recovery process. The Critical Illness accelerated benefit is not a Disability policy but benefit proceeds can be used for any reason whatsoever.