06 Aug You don’t have to die to collect life insurance benefits
There now are life insurance policies that will pay a benefit if you suffer a heart attack, stroke, cancer, kidney failure, blindness and major organ transplants – and you don’t have to die to collect. This policy will pay even if you have health insurance or Medicare coverage! It’s called “living benefits.”
Though you may think of the insurance industry as a pretty staid and dry business, every once in a while, a new product comes along that deserves attention. Many of our clients today have set up high-deductible health insurance plans. The living benefits rider could help pay these high deductibles along with giving a lump sum benefit when it’s needed most.
How does it work?
One such company, TransAmerica, offers a term life policy for 10, 15, 20, 25 or 30 years. Baked into their policy is the “living benefits” coverage. If you are diagnosed with a chronic, critical or terminal illness, you can accelerate a portion of your policy limits to pay for the costs associated with your condition. The trade-off is that the policy’s death benefit is simply reduced.
Let’s look at this scenario: Doris, age 35, non-smoker
Doris is married and has health insurance through her employer. She has a health savings account with a $3,000 annual deductible – the amount she has to pay before the insurance kicks in. Having discovered a swollen lymph node, Doris is told by her doctor that she has non-Hodgkins lymphoma, an often successfully treated cancer. She’ll lose time from work and the treatments will far surpass her $3,000 annual deductible.
Doris, however, had previously bought a 25-year term life insurance policy with a death benefit of $500,000. She and her husband figured that if she died, $500,000 would help get the kids through college and help pay the family’s living expenses in her absence.
With the “living benefit”, Doris filed a claim and received a lump sum benefit based on the severity of her condition. The policy benefit allowed her to cover the deductible and pay other expenses that would have been a financial burden for her and her family.
Life insurance can be a remarkably flexible product and an affordable hedge against the unexpected.