Living Benefits of Life Insurance

Living Benefits of Life Insurance


Life insurance, traditionally considered a safeguard for one's family after the insured's demise, has expanded over the years to offer living benefits. This added layer of protection ensures the policyholder can benefit from the insurance during their lifetime, making life insurance a resourceful tool beyond the confines of death benefits.

A Deep-Dive into Living Benefits Of Life Insurance

Living benefits are inclusions in life insurance policies, offering the policyholder the financial capacity to utilize their coverage under specified circumstances during life. Breakthroughs in the insurance realm have diversified these instances to include severe or long-term illnesses, critical health conditions, and chronic disability, among others, fostering an environment of support and financial relief for policyholders when needed.

1) Critical and Terminal Illness 

The burden of a critical or terminal illness diagnosis threatens more than just health; crushing medical bills and lost income potential tend to add significant financial strain to an already nerve-wracking situation. Having living benefits in your insurance policy can momentarily lift this worry, allowing policyholders to draw an advanced payout from their death benefit to manage mounting expenses, contributing to a more serene healing environment.

2) Support for the Silver Years: 

Growing older often comes with the need for consistent support, either at home or in an aged care facility. Costs associated with these services must be more light on the wallet, and living benefits can alleviate this financial burden. By facilitating access to the policy's death benefit, these benefits ensure comfort and care don't have to be compromised with mounting years.

3) Cash Value Accumulation

For those holding permanent life insurance, living benefits can come in the form of accrued cash value within your policy. This accruement functions somewhat like a savings account and grows over time on a tax-deferred basis, adding to the policyholder's potential wealth-generation avenues. Borrowing against this value is also possible, making it a convenient option for funding goals, offsetting unexpected expenses, or navigating life's various phases, further intensifying its financial benefits.

4) Weighing the Costs: Understand the Implications

While living benefits provide impressive boons, understanding the trade-offs involved is crucial. Primarily, any payout drawn as a living benefit ultimately reduces your death benefit, lowering the payout your beneficiaries will receive later. Additionally, acquiring living benefits might require you to pay increased premiums or lead to additional overall costs, which should be evaluated wisely.

Criteria and limitations often accompany living benefits, with stringent conditions dictating eligibility, so it would be prudent to understand the exact terms from the insurer. Furthermore, payouts from living benefits may impact your eligibility for public assistance, making it essential to consider this.

5) From Payouts to Lifelines: The Life Insurance Revolution

Living benefits alongside the inevitable death benefit bring a dynamic financial edge to life insurance, transitioning it to a proactive tool helping navigate life's adversities with added financial security. It transforms one's perspective on life insurance, viewing it from being a mere payout on demise to a lifeline during critical life events.

However, as is with every financial decision, careful deliberation is key before electing for living benefits. Ensure you thoroughly navigate your options, understand the implications, assess the costs, and align them with your long-term financial planning. An insurance professional or financial consultant can substantially aid in making you an informed patron, helping tailor the perfect insurance coverage that offers both life and death benefits.  

Benefits Come with Considerations

While living benefits significantly increase the value proposition of life insurance, there are a few factors to consider:

Reduction in Death Benefit: Any advance payment accessed as living benefits will reduce the death benefit. That means your beneficiaries may receive less than the original policy amount after your demise.

Possible Additional Costs: Depending on the specific life insurance policy, opting for living benefits could increase your premiums or involve additional costs.

Requirements and Restrictions: Accessing living benefits usually requires meeting specific criteria set by the insurance provider. These could include waiting periods, survival periods, or specific diagnoses.

Impact on Public Assistance: If you are receiving public assistance, any money received from living benefits could impact your eligibility.


The concept of living benefits has reshaped the outlook on life insurance policies, placing them firmly in the sphere of active financial management tools. By offering flexibility and financial aid during daunting life circumstances, these provisions grant policyholders peace of mind and security while still alive. However, like all financial decisions, one must meticulously consider the cost, restrictions, and impact on the long-term financial plan before opting for living benefits. Consulting with an insurance professional or a financial advisor can help illuminate the possibilities and constraints, ensuring you make an informed decision.

FAQs - Frequently Asked Questions

What is the term "living benefits" in relation to life insurance?

"Living benefits" is a term used to describe the potential to access part of your death benefit during your lifetime under certain circumstances. These circumstances can include being diagnosed with a terminal, chronic, or critical illness. By triggering these living benefits, policyholders can meet financial needs resulting from medical expenses, long-term care costs, and inability to work.

When and how can I avail of the living benefits in my life insurance policy?

You can avail of the living benefits in your life insurance policy if and when the conditions are met. These usually relate to serious health conditions, like terminal, chronic, or critical illness. Once these conditions are confirmed, you must contact your insurance company and follow an established process to claim these benefits.

Will using living benefits reduce the total payout of my life insurance?

Yes, any living benefits drawn from your life insurance policy will reduce the death benefit by the same amount. This means that your beneficiaries will receive a lesser amount upon your death.

Can the cash value of my permanent life insurance be considered a living benefit?

Yes, for permanent life insurance policies, the cash value that builds over time can be viewed as a living benefit. Policyholders may be able to borrow against the cash value or withdraw a portion of it to handle unexpected expenses or fund specific life goals.

Are there any additional costs for having living benefits in my life insurance policy?

This depends on the insurance provider and the specifics of your policy. Some insurers might increase premiums or charge additional costs for policies with living benefits. Before opting for living benefits, it's essential to understand and consider these potential additional costs.