Living benefits: using life insurance before you die
How accelerated death benefit riders work for terminal, chronic and critical illness, and how taking money early cuts what your family gets.
- A living benefit, also called an accelerated death benefit, lets you take part of your own death benefit while you are alive.
- The money is an advance, not extra. Accelerate 100,000 dollars from a 250,000 dollar policy and your family receives roughly the remainder when you die.
- The company applies a discount for paying early, so ask for the specific formula before you count on a number.
Most life insurance sold today comes with a rider, an add on to the policy, that lets you take part of your own death benefit while you are alive. The death benefit is the money your family receives when you die, so what you take is your own money early, not extra money on top.
These riders are called living benefits, or accelerated death benefits, and to accelerate means to take the money early. They are one of the good developments in this business over the last twenty years.
The three common triggers
A trigger is the health event that lets you start using the rider. Three of them are common, and each one has its own terms.
- Terminal illness. A doctor certifies how long you are expected to live, usually 12 or 24 months. Most policies include this rider at no extra charge.
- Chronic illness. You cannot do two of the six activities of daily living, the basic tasks of caring for yourself, or you have a severe loss of memory and thinking. This is the one that helps with long term care costs.
- Critical illness. A set list of events, such as a heart attack, a stroke, a cancer diagnosis or organ failure.
What they pay
You receive an advance on your own death benefit. Say you accelerate 100,000 dollars from a 250,000 dollar policy. Your family receives roughly the remainder when you die, so what you take now is money they will not get later.
The company also applies a discount to reflect the early payment, so it can hand you less than the amount you accelerate. Ask for the specific formula before you count on a number.
Why the chronic illness rider matters here
Long term care is expensive, and most families in South Texas absorb it themselves. An adult child cuts hours or leaves a job. A chronic illness rider does not solve that, but it can put real money in reach at the moment the household income drops, without selling a house.
What to check on your policy
- Is the rider included, or does it add to your premium, the bill you pay for the policy?
- Is it available on term coverage as well as permanent coverage, since many companies now include it on term?
- What is the most you can accelerate, as a percentage and as a dollar cap?
- How is the discount worked out?
- Does using it affect Medicaid eligibility? That is worth asking before you accelerate a large amount.
One caution
Living benefits are a good reason to choose one policy over another at the same price. They are not a reason to buy a smaller policy than your family needs. The core job is still replacing your income.
Check your existing policy
Bring your policy in and we will read the riders with you. Plenty of people already own these and do not know it. Call our McAllen office at (956) 687 3334, or use the ZIP form on this page. Se habla español.
Common follow-up questions
Do I have to pay the money back?
No. It is an advance against your own death benefit, so there is no bill and no loan to repay. It does reduce what your beneficiary, the person you named to receive the money, gets when you die.
Is the money taxable?
Terminal illness accelerations are generally not taxable under federal rules, and chronic illness benefits can be treated favorably too. Confirm with a tax professional for your situation.
Can I add a rider to a policy I already own?
Usually not after the policy is issued. Riders are chosen when you apply, which is why comparing them before you buy matters.
How much should it pay?
The death benefit is what your family receives. Most final expense policies here run between $5,000 and $25,000.
What kind of coverage?
Not sure is a fine answer. Your agent will walk you through the difference.
Male or female?
Rates are set separately for each, so this one changes the number.
When were you born?
Age is the single biggest thing that moves a final expense premium.
Any nicotine in the last year?
Cigarettes, cigars, chew or vape. Answering honestly keeps the quote accurate.
Who are we quoting?
So your agent knows who they are calling.
Where should we call you?
One call with your prices. No robocalls, no list selling.
Want a copy by email?
Optional. It means you have the numbers in writing after the call.
By pressing “Get my quote” you agree a licensed McAllen Insurance Group agent may contact you by phone, text or email at the details you provide, including by automated dialing. Consent is not required to buy. This is a request for a quote, not an application, and not an offer of coverage.
Getting your request to an agent
We have your request
An agent will call you with the prices. If you would rather not wait, call us now.
Call (956) 687 3334Monday to Friday, 9 AM to 6 PM. Se habla español.
Read next
How much life insurance do I actually need?
Life · 3 min read
Gerino Alejos
Licensed insurance agent · License 3128710 · NPN 18243381
Owner of McAllen Insurance Group, an independent agency on North 10th Street in McAllen. Works with clients across Hidalgo, Cameron and Starr counties on Medicare, Marketplace health, life and auto coverage. Se habla español.