I've heard people call
not true and illustrates the need for more education when it comes to life insurance. Before we get into that though, Life Insurance is called life insurance simply because it is insurance upon your life. The insurance carrier is betting (and hoping) that you'll live a long, health, happy life; that way you can continue to pay the premiums, they can invest those, and be able to cover all the claims that are made. (This also explains why premiums can be drastically different based on your health, age, gender etc. The betting odds for someone living that long, healthy life are much better for a 20 year-old female athlete than they are for a 65 year-old chain smoking man!)
It's also called Life Insurance because it allows your loved ones or employees to continue with their life during an extremely difficult time and without the financial hardships that can follow the death of a breadwinner or business owner.
So, how can Life Insurance benefit you or "payout" while you are still living? Aside from the obvious (cash value, policy loans, dividends, etc.) companies use additional benefits attached to the basic policy, called Riders, to enhance the policy. Often these riders are minimal or no-cost. Let's look at a few that you may want to consider.
Accelerated Death Benefit Rider
Today, this rider is very often a standard attachment to a policy and is usually included free. Simply put, the rider allows you to take a portion (5%-90%) of the death benefit or face value in advance, while you are still alive, if you are diagnosed with a terminal illness. In other words, if a doctor certifies that you only have a limited time left (usually 24 months or less), you can take your death benefit in advance to pay medical bills, eliminate debts, or check off items on your bucket list.
Critical Illness Rider
We all know people who at some point in their life have experienced a "critical illness". This could include cancer, heart attack, stroke, kidney transplant, etc. This rider allows the insured to take a part of their death benefit in advance to help in these situations. It's usually set up so that you can take one withdraw from the death benefit per occurrence in a 12 month period. This rider can certainly help pay for mounting bills that have occured during the illness period.
Chronic Illness Rider
Similar to the riders listed above this rider allows you to use some of your death benefit in advance to help pay for things like nursing or in-home healthcare. To qualify for this, the insured must be certified by a physician as being unable to perform at least 2 ADLs (Activities of Daily Living). These would include not being able to bathe or shower, walk, get dressed, get in or out of bed or a chair, use the toilet or eat. Although not a Long-Term Care policy, it can help pay those types of bills.
Talk to your agent about these riders to see if your current policy has them or if they can be added. Many of them are free or will increase your premiums minimally by 5% to 10%. Your agent will have all of the details, costs, and qualifications for these types of riders.
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