Imagine this: Out of nowhere, you receive a diagnosis from your doctor that informs you that you have a terminal disease and only have less than a year to live. You feel that a train moving like a speeding bullet head-on has hit you. You are devastated and start to reflect on your life and your family’s quality of life if you don’t beat the illness. Hundreds of questions start to go through your mind:
Will your health insurance cover the cost of the treatment for your terminal illness?
Outside of what your health insurance may cover, where will the extra money for treatment come from?
If you have to go into a nursing home facility, who will pay for the cost?
Since the terminal illness will impact your ability to work, where will you get the money to pay for your household expenses and other financial responsibilities?
For millions of people every year, the questions above are a reality as they receive news that they will be chronically ill with a life expectancy of less than one year and a high probability for long-term care.
How can you protect yourself, your family, your assets, and the quality of life that you have built for them if faced with the scenario above? The answer is to have a life insurance policy with a living benefits rider (also known as an accelerated benefits rider). You most likely know that life insurance is important; however, it’s important for many different reasons beyond the common thought of using it to pay for funeral expenses.
Living benefits, also known as “accelerated benefits”, are life insurance policy proceeds paid to the policyholder before they die. This benefit provides that all, or a portion of, the policy’s proceeds will be paid to the policy owner when certain events occur, including:
Terminal illness, with death expected within a specified period;
The occurrence of a specified catastrophic illness or the need for extraordinary medical intervention, such as an organ transplant or continued life support;
The need for long-term care due to an inability to perform a number of “activities of daily living,” such as bathing, dressing, eating etc.; and
Permanent nursing home confinement.
In these instances, the life insurance company will deduct the living benefits payment from the death benefit it ultimately pays to the beneficiary (usually at a discount). A growing number of companies offer living benefits at no additional premium, but as the policyholder, you will be charged if and when it is used. In most cases, the company will reduce the benefits advanced to the policyholder before death to compensate for the interest it will lose on its early payout. Currently, more than 150 companies offer some type of living benefits while other companies have indicated they are developing similar plans or are considering them. It is believed that more than three million Americans are now protected by accelerated benefits.
Insurance companies usually offer anywhere between 25 to 100 percent of the death benefit as early payment, though the amount can vary among policies. Sometimes, payments are made in monthly installments; at other times, they are made in a lump sum. Some policies even allow the policyholder to choose the method of payment. You will need to consult with your insurance provider to find out the specifics of your policy.
RWM Insurance can help you understand what coverage you actually need and what viable options are out there for you and your loved ones.