What are the implications of Living Benefits on permanent life insurance policies?

The Living Benefits riders are paid out early to policy holders who have a terminal, chronic or critical illness. (See our blog on Term Life Insurance and Living Benefits). This allows financial comfort to the policy holder and family. It helps them to focus on the emotional and physical aspects of the situation, rather than the financial ones.

Is the Living Benefit riders available on all insurance policies?

The short answer is no. However, most permanent life insurance policies provide this option. On term life insurance some policies do provide it, but the qualification are stricter.

How are Living Benefits different on Permanent Life Insurance policies?

Permanent, or whole life insurance has a cash value, similar to equity,which therefore builds over time. As a result, you can use it early for a variety of reasons including college, a new home, a financial emergency and potentially retirement income.

There are also loans you can obtain on your policy. However, if you die before the loan is paid off, your beneficiary will be affected. Their payout will be less to pay off the amount of the loan.

Are there tax benefits on Living Benefits?

The cash value growth is tax-deferred with a rider on a Permanent Life Insurance policy.  Additionally, the income on death benefits is also tax-free.
In some cases, dividends may be paid by the insurance company. Maybe you want to take cash, use them to pay back a policy loan, or just purchase more insurance. You may be taxed, depending on the amount you receive.

How do I know what is best for my situation?

If you have questions, reach out to a reputable insurance agent like Ron L. Reed. At Ron L. Reed and Associates, our mission is simple, “To be Clear, Concise and Conversational with our potential and current clients. Our values are People Respect, Opportunity, Passion, Excellence and Loyalty.” RLR is a life insurance comparison service, shopping over 25-30 of the nation’s top companies. Consequently, we work on behalf of YOU and not any life insurance company to find the best rates and products available on the market.

Give us a call or get an instant life insurance quote by filling out the form to the right.