Living Benefits of Life Insurance
You may have a decent understanding of the benefits of life insurance, like how it can help financially protect your loved ones in the event you were to pass away. But did you know that life insurance can also provide benefits while you’re still living?
Here’s a high-level look at some of the living benefits of life insurance.
What does Living Benefits of Life Insurance Mean?
Life insurance allows you, the policy owner, to build cash value through your life insurance policy that accumulates over your lifetime. This is considered a living benefit of life insurance because, in contrast to a death benefit that pays out when you pass away, you can use the money while you’re still alive.
What Is Cash Value in Life Insurance?
So, where does this “cash value” come from? Good question. You have the ability to gain cash value through a permanent life insurance policy, such as American Family Life Insurance Company’s Whole Life or MyLife Flexible coverage. Typically, a premium for permanent life insurance is more expensive than a term life insurance premium because permanent life insurance policy coverage lasts for a lifetime (versus a specific length of time like term life insurance) and accumulates cash value over time.
Here a closer look at the benefits:
Tax-deferred growth. When you have a permanent life insurance policy, the cash value grows tax-deferred.
Loans. You can borrow against the cash value of your policy for things like tuition payments, emergencies and even to supplement your retirement income. Keep in mind, this still is considered a loan, and if it’s not repaid before you pass away, then your death benefit is reduced by the amount of the loan plus any outstanding interest. Also, failure to pay loan interest could result in the policy lapsing.
College savings. If you have kids who will attend college someday, your life insurance cash value could be used to help pay for their schooling and it is currently not considered in federal financial aid calculations.
What Is a Living Benefit Rider?
A living benefit rider is additional coverage on your basic life insurance policy that provides supplementary benefits and protection to you, sometimes at an extra cost. A rider comes in handy when you have specific needs that aren’t covered by a standard insurance policy. Basically, a rider is used to customize your policy to fit your needs.
For example, if you’re terminally ill, an accelerated death benefit rider may pay out a portion of your death benefit while you’re still alive. You could use the payout for things like medical expenses, among other uses, and when you pass away, your beneficiaries will receive a reduced life insurance benefit since you used a portion of the policy already.
The living benefits of life insurance can help provide additional layers of protection — just one more way life insurance helps protect what matters most. Talk to your American Family Insurance agent to see if your American Family Life Insurance Company policy has living benefits. In the meantime, check out our life insurance coverages to see which option is best for you and your loved ones.
Policy Form L-24 (10), Policy Form L-24 (20), Policy Form L-24 (30), Policy Form L-60 Policy Form ADL-34235 — 12/13, Policy Form ICC13-97 UL, Policy Form L-97 UL (AZ, ND, SD only)