Living benefits refer to insurance policy features that provide policyholders with access to funds or benefits while they are still alive, typically due to specific circumstances such as illness, injury, or disability. These benefits are designed to provide financial assistance to policyholders during times of need, allowing them to access a portion of the policy’s death benefit to cover medical expenses, long-term care costs, or other financial needs. Living benefits are commonly associated with certain types of life insurance policies, such as permanent life insurance or hybrid life insurance products like critical illness insurance or long-term care insurance. By offering living benefits, insurance policies provide additional value and flexibility to policyholders, enhancing their financial security and peace of mind during both life and death.
In some life insurance policies, benefits are available before death, in such events as long-term, catastrophic or terminal illness. This benefit first became available when companies offering viatical settlements purchased the life insurance policies of terminally ill individuals from the insurance companies which issued the policies. After extracting a portion of the value of the policy for costs and profits, these companies offered the remainder of the death benefit to terminally ill policyholders. Insurance companies have different rules about how much money can be extracted and how close to death the holder must be to receive benefits early.
The remainder of the value of the policy, minus interest charges, is awarded to the beneficiaries upon the death of the holder. also called accelerated benefits.
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This glossary post was last updated: 29th March 2024.
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