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A standard life insurance policy provides a death benefit to your beneficiary when you die. But living benefits on a life insurance policy are benefits you can use while still alive.

If you buy term life insurance, you usually have the option to customize your policy with several living benefit options. A permanent (whole) life insurance policy can include the same living benefits, with the added benefit of cash value access. Depending on your situation, you may not need living benefits. A standard term life insurance policy without living benefits is often the cheapest option and may be the best choice for people in this situation.

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Key Takeaways

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Living benefits on a life insurance policy refers to benefits you can use while still alive. A qualifying medical event allows you to accelerate part of the death benefit.

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Long-term care, a disability premium waiver, chronic or terminal illness and critical illness are examples of living benefits riders on a life insurance policy.

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Buying permanent (whole) life insurance also provides access to cash value you can withdraw or take a loan from. You can also include long-term care coverage for an extra cost.

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What Are Living Benefits in Life Insurance?

Some people use living benefit options on their life insurance policy as an extra source of income in specific situations. The most common life insurance living benefits are accelerated death benefits. These benefits are available on both term and permanent life insurance policies.

Living benefits give part of the death benefit to the insured to use while still alive after a qualifying health event occurs. Once approved, the life insurance company accelerates, or makes available, a portion of the death benefit, which reduces the amount the beneficiary receives upon the insured’s death.

Common Examples of Living Benefits

Chronic Illness

A chronic illness rider applies when a doctor diagnoses the insured with a chronic illness that impairs at least two activities of daily living (ADLs), which include eating, bathing, continence, dressing and toileting. A chronic illness lasts at least a year or longer and requires ongoing medical attention or limits ADLs.

Critical Illness

A critical illness rider applies after a policyholder is diagnosed with an illness that shortens life expectancy but may not be terminal and can come with high medical expenses. Examples of critical illnesses include heart attack, stroke or kidney failure.

Disability Waiver

If you suffer from a long-term disability that prevents you from working for at least six consecutive months, the disability waiver of premium will allow you to skip premium payments to keep coverage in force until you are able to go back to work.

Long-Term Care

The long-term care benefit rider will accelerate part of the death benefit to pay for long-term care expenses not covered by health insurance. Like the chronic illness rider, you must be unable to perform at least two of the six ADLs.

Terminal Illness

If you are diagnosed with a terminal illness with two years or less to live, you can accelerate part of the death benefit to pay for medical costs, final expenses or other personal expenses, like a vacation. This feature may be added to your life insurance automatically but can also be an optional feature with additional premium.

If you’re trying to decide if life insurance with living benefits is worth it, consider this:

  • According to the CDC, 6 in 10 adults live with a chronic illness. Four in 10 live with two or more.
  • Three in 10 Americans can’t afford a $400 bill without using a credit card. Could you pay your life insurance premium after being out of work on disability for over six months?
  • A person turning 65 today has a close to 70% chance of requiring long-term care services. Twenty percent will need them for five years or more.
  • Cancer is just one form of terminal illness. The American Cancer Society estimates 1 in 5 men have a risk of terminal cancer, while 1 in 6 women have the same risk.
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A rider is a life insurance benefit you can add to your policy to provide another layer of protection. It allows you to customize your policy to your unique needs. Besides the riders listed above, you could include riders for accidental death, guaranteed insurability, spouse or child term coverage and return of premium.

How Do Living Benefits Work?

Unlike a death benefit, which only works once you pass away, living benefits work as life insurance you can use while alive. When you choose a living benefit option in a life insurance policy, you’re giving yourself access to funds that wouldn’t be available otherwise. When you buy a standard term life policy, you get a cheaper rate because the only benefit is the death benefit your beneficiary receives after you die.

Life Insurance Cash Value: Another Kind of Living Benefit

When you buy permanent life insurance, you get another type of living benefit: cash value. Available in whole life and universal life insurance policies, cash value is like a savings account built into your life insurance that you can withdraw or take a loan from.

Part of each premium payment goes toward the cash value, which will grow over time with interest. The growth rate depends on the type of life insurance policy you have and how much in premiums you pay. If you decide you no longer need permanent life insurance, you can surrender the policy and keep the cash surrender value.

There are multiple ways to use the cash value living benefit while still alive.



You can withdraw a portion of your cash value balance tax-free as long as the withdrawn amount is equal to or less than your paid premiums. You could owe taxes if the withdrawn amount is from dividends, capital gains or interest. The withdrawn amount reduces your death benefit unless repaid.



Mutual insurance companies can choose to pay permanent life insurance policyholders a dividend if there is money left over at the end of the year after paying expenses. This dividend can be added to the cash value to allow it to grow faster but can be taxable as ordinary income if removed from the cash value account.



Taking a loan from the cash value doesn’t require an application or credit check and can have a better interest rate than taking out a personal loan. Paying the loan back is optional, but interest — as determined in your policy contract — will continue to accrue and reduce the death benefit amount.



A policy surrender allows you to access the cash value in a lump sum minus any unpaid premiums or outstanding loan balance. Surrendering your policy cancels it, so there will be no death benefit amount available to your beneficiary when you pass away.

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If you’re interested in the cash value living benefit, it’s only available through a permanent life insurance policy. These policies typically cost more than term life insurance, but the plan offers a lifetime death benefit rather than a set number of years with a term life policy. We analyzed dozens of companies to bring you the best carriers for universal life and whole life insurance policies.

Limitations of Living Benefits in Life Insurance

Living benefits in life insurance offer valuable support during critical times, but they come with certain limitations. Understanding these restrictions is important for making informed decisions.

  • Eligibility Criteria: Not all policyholders may qualify for living benefits. Eligibility often depends on specific medical diagnoses or conditions, and the criteria can vary between insurance providers.

  • Reduction in Death Benefit: Accessing living benefits may reduce the overall death benefit available to beneficiaries, potentially impacting the financial support provided after the policyholder's death.

  • Claim Limits: Insurance companies may impose limits on the amount that can be withdrawn through living benefits, either as a percentage of the death benefit or a set dollar amount.

  • Additional Costs: Some living benefits riders may require an additional premium, increasing the overall cost of the life insurance policy.

  • Waiting Period: There may be a waiting period from the time the coverage is signed until the date when the living benefits become effective, restricting immediate access.

Should You Purchase Life Insurance With Living Benefits?

Although most living benefits life insurance riders come with additional premiums, some are free with your policy. The most common free living benefit is the accelerated death benefit for terminal illness. Ask your agent if you’re not sure whether you have living benefits on your life insurance policy. If you’re looking to purchase life insurance with living benefits, let your agent know so they can tailor your quote and policy to your specific needs.

There are several reasons to purchase living benefits life insurance. If there’s a family history of chronic or terminal illness, you think you could outlive your retirement income or you plan to start a business, this might be the best policy for you.

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    Your family has a history of chronic or terminal illness.

    Medical bills can be costly with a chronic or terminal illness. If either type of illness runs in your family, you’re more likely to end up with a chronic or terminal illness. Life insurance with living benefits can help you pay for medical costs or enjoy one last vacation with your loved ones if you’ve been diagnosed with a terminal illness.

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    You think you need more money for retirement.

    While no one can predict how long they’ll live, some people end up living longer than their retirement income. Buying life insurance with living benefits, especially cash value life insurance, can help ensure you’ll have enough money to fund your retirement. You can withdraw funds or take a tax-free loan from your cash value and still have accelerated death benefit riders to access part of the death benefit if you need long-term care or are diagnosed with a qualifying illness.

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    You plan on starting a business.

    Starting a business can be scary, but for many, the fear is worth it when they succeed. Having living benefits life insurance can provide you with cash value to fund your business venture or provide collateral if you need a business loan. Life insurance proceeds can provide your heirs with the funds to continue the business or transition according to your wishes. You can also purchase life insurance for your key employees as part of a compensation package.

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    It’s free.

    Some life insurance policies include living benefit riders automatically at no extra cost. The terminal illness rider is usually free, while others may cost extra. Working with a life insurance agent can help you find the best policy with free living benefits coverage and the right policy for your needs. Consider a permanent life insurance policy if you want cash value benefits or long-term care coverage. Other living benefits riders can be added to a term life insurance policy.

How to Get Living Benefits in Life Insurance

Obtaining living benefits in life insurance involves a few key steps. Here's a step-by-step guide to help you get started.


1. Research Insurance Companies

Start by researching insurance providers that offer living benefits, either as standard features or optional riders. Make a list of potential companies.


2. Identify Policy Types

Look for policies that mention living benefits or accelerated death benefits. Consider both term and permanent life insurance options to see which suits your needs.


3. Consult a Professional

Consider engaging with a licensed insurance agent or financial advisor. They can help you find policies tailored to your needs and budget, making the selection process easier.


4. Complete the Application

Fill out the application form for the chosen policy. This step often includes undergoing a medical exam and providing details about any pre-existing conditions you may have.


5. Review and Add Riders

Once approved, review your policy. If living benefits are not included, add the appropriate riders. Be aware that this may increase your premium.


6. Understand the Costs

Familiarize yourself with any additional costs associated with adding living benefits riders. This will help you manage your budget effectively.


7. Review Eligibility and Limitations

Understand the criteria for accessing living benefits and any limitations that may apply. This includes knowing how it may affect your death benefit.


8. Read Policy Documents

Thoroughly read all policy documents to understand the features of the living benefits offered. Make sure they align with your financial and health goals.

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Frequently Asked Questions About Living Benefits in Life Insurance

In some situations, buying life insurance with living benefits is worth it. However, every person's needs and circumstances are different. Reviewing the answers to some of the most commonly asked questions about living benefits can help you determine whether are worthwhile.

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About Mandy Sleight, Licensed Insurance Agent

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Mandy Sleight is a licensed insurance agent and has worked in the industry since 2005. She has her property, casualty, life and health licenses. Mandy has worked for well-known insurance companies like State Farm and Nationwide Insurance, and most recently as the Operations Coordinator for a startup employee benefits company.

Mandy earned her Bachelor of Science degree in Business Administration and Management from the University of Baltimore and her Master of Business Administration from Southern New Hampshire University. She uses her vast knowledge of the insurance industry and personal finance combined with her writing background to create easy-to-understand and engaging content to help readers make smarter choices with their budgets and finances.