Term Life Insurance For the Living

UPDATED: Mar 26, 2020

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Okay, so you’re alive, and you want to keep it that way. After all, you still have places to see, things to do, people to love. Fair enough. How can term life insurance help you with this? Life insurance for the living — sounds like an oxymoron, right? Once again, fair enough.

Term life insurance is ideal for protecting your family financially if you pass away. But what about protecting your family in the event of a critical or chronic illness such as a heart attack, stroke or cancer? Would you have the funds to cover those unexpected medical expenses or the lost income you would suffer? Sure, you can buy separate policies to cover those situations. But what if you could get one policy to cover it all: death, terminal, critical and chronic illness?

Well — you can! You knew I was going to say that, didn’t you?

The Evolution of Term Life Insurance

If life insurance was like ice cream, term life insurance would be the flavor vanilla. And that’s a good thing – for several reasons. First, it’s the most basic, simple and pure form of life insurance protection you can buy. No frills, no thrills. Second, because you only get what you need, you don’t have to pay for those extra frills and thrills. And finally, vanilla is the most popular flavor of ice cream, according to The Food Channel.

Life insurance companies continue to add additional benefits to their term life policies to spice them up and make them more attractive to you. This, too, can be a good thing. We’re talking about goodies like Accelerated Death Benefits, Disability Waivers, and Conversion Options. Think of these added benefits as the sprinkles or mini M&M’s on top. And the best part – they’re included for free!

Introducing Living Benefits

Perhaps the best ‘topping’ of all is Living Benefits, which comes from Transamerica Life Insurance Company. They are exactly what the name implies: life insurance benefits you can use while you are still living.

Living Benefits are similar to Accelerated Death Benefits. The both offer access to your policy’s death benefit (aka coverage amount or face amount) to cover things such as terminal illness. Hence the word ‘accelerated.’ These benefits are provided to you early, and your new death benefit amount is reduced by the amount taken, applied interest and administrative fees.

“Whoa, wait a minute,” you say? “If they are the same, what makes Living Benefits so special then?”

Glad you asked. Accelerated Death Benefits are more restrictive in that many companies make them available only in the case of a terminal illness. Meaning, you must be diagnosed by a licensed physician as having a reduced life expectancy – say, six months for example.

Living Benefits shine here because they can be used for terminal illness as well as critical and chronic illnesses. So you don’t necessarily have to be on your death bed to get the money you need. Perhaps you had prolonged treatment for cancer, or you require nursing care because you are not able to perform two or more activities of daily living such as bathing, dressing or eating.

So, How Much Cash are we Talking Here?

Sorry, there’s no easy answer for this one. Like many things, there are several factors at play here, such as:

  • The policy face amount you choose to accelerate
  • Your life expectancy as determined by the life insurance company
  • The accelerated benefit interest rate
  • Administrative fees

The benefit is based on the severity of the illness and the impact on remaining life expectancy. Here’s an example of how it would look for a $200,000 term life policy with 90% acceleration ($180,000).

Age Gender Class Amount of Insurance
25 Female Super Preferred $1,370,000
25 Female Standard $600,000
25 Male Super Preferred $1,095,000
25 Male Standard $480,000
35 Female Super Preferred $1,165,000
35 Female Standard $455,000
35 Male Super Preferred $1,010,000
35 Male Standard $410,000
45 Female Super Preferred $455,000
45 Female Standard $225,000
45 Male Super Preferred $350,000
45 Male Standard $160,000

And It’s Mine… To Keep?

Yes, your benefit is yours to keep. It is not a loan, and you do not have to repay it to the life insurance company. You can pay for medical care and treatment, in-home nursing care or medical supplies and equipment. You can also use the funds to replace lost income and help with non-medical related bills and expenses. The money is yours to use as you wish. Also, depending on how much you accelerate, you will still have some death benefit left over on your life insurance policy for your beneficiaries.

You can find more details about Living Benefits in this blog post. And be sure to ask your agent about Living Benefits from Transamerica Life.

Tim Bain

Tim is a licensed life insurance agent with 23 years of experience helping people protect their families and businesses with term life insurance. He writes and creates stuff for QuickQuote and other insurance and financial websites. You can find him on Twitter.

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