Term Life Insurance With Living Benefits (Quotes Comparison & More)

Term life insurance with living benefits can keep you from going broke by paying out for long-term care and medical bills, and affordable term life insurance policies with living benefits don’t have to be hard to find. See the pros and cons of living benefits life insurance and compare quotes today for free with our tool below.

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Schimri Yoyo is a financial advisor with active life and health insurance licenses in seven states. Born in Haiti. Reared in Brockton, MA. Matured in Philadelphia. Schimri is a proud graduate of Arcadia University, having earned both a Masters in Special Education and an MFA in Creative Writing from the castle-riddled campus in Glenside, PA. By personality and by profession, Schimri is an educator...

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UPDATED: Oct 16, 2020

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Quick Facts

  • Term life insurance with living benefits offers you some standard life insurance benefits before you are deceased
  • Term life insurance with living benefits is often referred to as accelerated death benefits
  • Term life insurance with living benefits is usually offered as an optional rider
  • Term life insurance with living benefits can often be included in your policy for a small increase in cost
  • Receiving living benefits will not change your overall death benefit, just the timing in which the benefit is received

Term life insurance with living benefits (also known as accelerated death benefit) is essential for financially protecting your loved ones, business, or estate.

There isn’t another form of insurance or a financial tool that provides the value you get from term life. It’s inexpensive, simple to maintain, and term life insurance quotes are easy to get.

We’re here to help walk you through finding the best term life insurance with living benefits, how to get the best rates, and more.

Ready to start looking for term life insurance with living benefits quotes? Use our FREE quote tool above to get an idea of what you can expect to pay.

Table of Contents

What is accelerated death benefit in life insurance?

Most life insurance companies include a rider on their term life policies that allows the payment of a portion of the policy death benefit to be paid to the policy beneficiary(s) in the event the primary insured is diagnosed as terminally ill by a practicing, licensed physician.

This rider is usually called an Accelerated Death Benefit Rider or Living Benefit Rider. The rider is almost always included at no additional cost and is subject to state availability.

Each life insurance company has guidelines regarding the specific requirements of the rider. The chart below shows some of these guidelines and the general range across companies.

 

 Life Expectancy

 Amount Allowed

 Maximum Amount

 

 6 – 12 Months

 25% – 75%

 $250K – $500K

The life expectancy is the amount of time the licensed physician expects the primary insured to live. The amount allowed is the percentage of the policy face amount the insurance company will ‘accelerate’ or pay out.  The maximum amount is simply the most the company will pay under the rider.

It is important to note the amount accelerated is treated as a policy loan and is deducted from the face amount of the policy along with any accrued interest and administrative fees.

The Accelerated Death Benefit rider can be a valuable feature should you become terminally ill during the term of your life insurance policy. There are some tips provided by the National Association of Insurance Commissioners.

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Proceeds can be used to pay related medical expenses, to prepay funeral expenses or to settle any other outstanding issues before an anticipated death.  Of course, you may never choose to use the rider, which may be the best scenario of all!

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Best Living Benefits Life Insurance Companies

Several companies offer this policy with their level policies, or as an additional rider.

Northwestern Mutual offers an early pay benefit if the insured has been diagnosed with less than six months to live. This isn’t available in some states. Likewise, some policies are exempt from the early pay benefit.

With Northwestern’s early pay benefit, you can expect to get up to 50 percent of your death benefit ahead of time.

MetLife offers long-term care and an accelerated death benefit rider to assist with any care that your loved one may need. This rider will keep you from having to dip into your own personal savings to cover assisted living or a part-time nurse.

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To qualify, the insured will have to be unable to perform the basic and necessary acts of daily life such as bathing, eating, dressing, and using the bathroom on their own.

New York Life offers an accelerated care rider that can be used in case of permanent or temporary impairment. To qualify, the insured will have to be unable to perform the basic and necessary actions of everyday life. They will front you half your death benefit, up to $500,000.

Prudential’s BenefitAccess™ rider will front you up to 100 percent of your death benefit if you’re facing a chronic or terminal diagnosis that requires further care. As long as you sign up at the start of your policy and have a coverage amount of at least $100,000, you’ll be all set to take full advantage of this rider.

Lincoln National’s TermAccel® term life policy offers a minimum coverage of $100,000 and can be accelerated if you face an illness that’s likely to result in your death. Receiving this benefit early can be taxed and affect your ability to draw assistance from government programs. There is a one-time charge if you choose to use this rider.

Top Life Insurance Companies by Market Share

Here are a few companies that already offer accelerated death and accelerated care benefits either as a rider or already included in the policy.

Top Five Life Insurance Companies by Market Share

CompaniesMarket Share
Northwestern Mutual6.42%
Metlife6.00%
New York Life5.68%
Prudential5.57%
Lincoln5.36%
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A market share indicates a company’s percentage hold on the consumer base. These companies have high market shares due to their excellent service and the degree to which they have helped customers in their time of need.

There are many questions to answer before we can say who has the best term life insurance policy. Add in special scenarios like accelerated death benefits and things become even more difficult.

Sample Life Insurance Rates

Rates may vary between companies and based on your risk factors. Here is an example of what you can expect to pay with Lincoln National, which offers living benefits attached automatically to the policy.

These rates reflect the different prices between men and women who don’t smoke.

Lincoln Financial Average Monthly Life Insurance Rates by Age and Gender

DemographicsMonthly Rates
25-Year-Old Female$187
25-Year-Old Male$231
35-Year-Old Female$191
35-Year-Old Male$238
45-Year-Old Female$239
45-Year-Old Male$283
55-Year-Old Female$435
55-Year-Old Male$615
65-Year-Old Female$903
65-Year-Old Male$1,577
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As you can see, the prices can multiply exponentially the longer you wait to sign up for the policy. It’s best to sign up for the policy early to get the type of policy you want at the rates you can afford.

Keep in mind that living benefits National Life Group policies will likely have different price variables than AIG living benefits.

What is the purpose of having an accelerated death benefit on a life insurance policy?

The living benefits definition is almost exactly what the name implies: benefits paid from the term life policy while you’re living. These are more commonly known as accelerated death benefits.

With these benefits, the life insurance company pays or advances a portion of the policy’s death benefit to you to pay for care or treatment.

The company will then pay the balance of the death benefit to your beneficiary(s) if you were to die.

There are many companies that offer life insurance with living benefits. Transamerica life insurance company, for example, has integrated this idea into a new term life offering called Trendsetter LB (Living Benefits).

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The Trendsetter LB policy pays accelerated death benefits to policy owners who are either chronically, critically, or terminally ill.

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Which type of life insurance provides living benefits?

Let’s take a look at the three most common types of life insurance with living benefits.

Chronic Illness Accelerated Death Benefits Rider

According to the Centers for Disease Control and Prevention, chronic diseases such as heart disease, stroke, and cancer are among the costliest of all health problems in the United States.

If you were to become chronically ill during the term of the policy, the company would advance up to 90 percent of the policy’s coverage amount ($500,000 maximum) to help you pay for treatment or to replace lost income.

To qualify for this benefit, a licensed health care practitioner has to verify that you’re unable to perform two out of the six activities of daily living (bathing, continence, dressing, eating, toileting, and transferring).

Critical Illness Accelerated Death Benefits Rider

If you were to suffer a critical health condition such as lung cancer, heart attack, stroke, or paralysis, you could be eligible to receive accelerated death benefits from your policy.

Once again, the company will advance up to 90 percent of the policy’s face amount ($500,000) maximum if a licensed physician determines that you’re critically ill.

Can you get life insurance if you have a terminal illness?

Are accelerated death benefits with a terminal illness out of the question? Learn about terminal illness accelerated death benefits riders.

The terminal illness benefit is for more serious conditions where a licensed physician has diagnosed you have less than 12 months to live. It’s safe to go by common terminal diagnoses as provided by StanfordThis policy will advance up to 100 percent of the policy’s face amount, with a maximum of $500,000.

The terminal illness benefit has been around for a long time and isn’t unique to Transamerica Life’s Trendsetter LB policy. In fact, it’s a very common benefit included in most term life insurance policies.

The benefit amounts and terms do vary by company, so be sure to ask your agent for specifics if this benefit is important to you.

Accelerated Death Benefit Limitations

It’s important to note that there are some limitations to be aware of with these types of benefits. Whether it be a legal issue that needs ironing out or ineligibility based on your underwriting, you may face issues getting your policy.

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There are many factors considered by the life insurance company when evaluating a request for accelerated death benefits. It’s a good idea for you to get a solid understanding of these benefits before you purchase a policy.

You don’t want to wait until a chronic illness strikes to learn how your policy works. The two most prominent limitations are legal & financial and prior underwriting.

Accelerated Death Benefit Example

Let’s start with a legal and financial example.

Legal & Financial

Accelerated death benefits aren’t available in every state. For example, the Transamerica term life insurance policy with living benefits isn’t available in New York. It’s available in Texas, but the terminal illness portion is not.

Many standard term life policies that offer accelerated death benefits are also limited by state restrictions. It’s best to confirm availability in your state with your agent.

How much you can receive ahead of time will be determined before you start your policy. So you should be sure to ask your agent or review that information on your contract.

Many benefits are limited regarding amount and frequency. For example, although the chronic illness benefit allows up to 90 percent of the policy’s face amount, that amount is limited to 24 percent per year. There may be other limitations based upon individual circumstances, such as the life expectancy.

Something else to look out for is the fees that will be taken out of the advance before you receive the money, so you don’t get surprised when you receive less than expected.

Accelerated death benefits are essentially loans against the policy’s face amount.

The company will use a benefit interest rate used to determine the present value of future benefits. This rate, along with administrative fees which vary by company, will be factored into the amount of the benefit allowed.

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Another important consideration is that receiving the lump sum could place you above the qualifying requirements for Medicaid and Social Security benefits. You should discuss this with your agent before you lose out on your benefits.

Prior Underwriting

If you’re given a sudden medical diagnosis that doesn’t look good, you most likely won’t be able to get this policy. This benefit or rider is best purchased as a just-in-case option.

Outside of this, you can expect the typical underwriting process where your job, habits, and overall health as a whole will be considered before you learn if your policy was accepted.

If your family has a history of severe illness or you live a riskier lifestyle, then you can expect to pay higher premiums to cover that risk.

Factors That Affect Your Life Insurance Premium

Your rates will mostly be affected by any risks that make it more likely that you’ll die during the life of the policy. If the insurer thinks they will have to pay out before they make a profit, you may even be denied altogether.

They will find out what risk you pose through a process called underwriting. An underwriter will look at your life to determine the likelihood that you’ll pass away before the end of your policy.

You may be subject to anything from a voluntary questionnaire to blood work and a medical exam.

If you live a riskier life, you may have to pay higher premiums to cover that risk. If you live longer to pay the premiums, and the insurer has a better chance of making a profit on the policy, your premiums will be lower.

While certain red flags stand out to insurers, anything that poses a risk to your life will be viewed negatively.

Demographics

Even if you have no risky behavior in your life, there are still chances you’ll have to pay more for coverage. The two factors that affect all our policy decisions are age and gender.

Age is important, because the older you get, the more susceptible you become to disease and injury. The later in life you decide to purchase your policy, you’ll be paying that much more for life insurance. The best way to get savings no matter what is to start your policy as soon as you can.

Gender is important because on average, men die sooner than women, according to the NCBI. Because of this, women often don’t have to pay as much as men who are in the same risk categories. The savings aren’t monumental, but women do pay less each month for their premiums.

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The best way to get good premiums is, undoubtedly, starting as soon as you can. You’re guaranteed to save more for every year that you sign up earlier for your policy.

Health & Family Medical History

As previously mentioned, the insurer will look at your health to determine what kind of risk you pose. The underwriter will do research and ask you questions to understand your health and susceptibility to illness.

You may be subject to a voluntary questionnaire, blood work, a physical, or all three. It’s best to disclose any prior illnesses, medications, or anything else you use that may be found in these results.

If you’re not honest, you’ll likely be declined from the policy. Your underwriter researches clients every day, so if you’re hiding something, they will likely be able to find out.

Likewise, most insurers won’t give you a policy if there is evidence that you may get sick in the near future. So if your family has a history of heart disease, cancer, or another unpredictable prognosis, you’ll likely have to pay more to cover that potential risk.

If you don’t have enough time to pay into the investment to offset the loss, the insurer won’t see any value in doing business with you.

High-Risk Occupation

Since insurers care about things that pose a risk to your life, the underwriter will spend time gathering information about your job as well. If you work in a field that has a high fatality rate, insurers will most likely look at that negatively.

Those with dangerous jobs put their lives on the line to keep us all going along, and we are grateful for it. That being said, it might be worthwhile to take a look at jobs that could raise your life insurance premium.

These policies are specifically geared towards that industry and offer coverage that’s more affordable than you would get from an individual policy.

That being said, some jobs are more hazardous than others. Some examples include trash and recycling collectors, roofers, pilots and flight engineers, logging workers, and individuals who work in the fishing industry.

High-Risk Hobbies

Just like your occupation, what you do in your free time could cause an insurance underwriter to raise your premiums if you’re up to any risky activity.

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If you don’t report these activities to your insurer and you perish while doing them, your family may not receive the death benefit because of your dishonesty.

Smoker? Term life insurance e-cigarette use and tobacco use may raise rates. Tobacco use may even cause you to pay twice as much on your premiums when paired with your age.

This is because of the known effects and dangers of tobacco use. With the new research surfacing surrounding the dangers of using e-cigarettes, some insurers will classify you as a smoker or in its own, more expensive category.

Adrenaline junkies should watch out because extreme sports and other risk-taking behavior will land you with high premiums or no policy at all. This includes things such as skydiving, base jumping, rock climbing, and anything that can leave you with little or no protection from the consequences.

How to Get the Best Life Insurance Rate

When it comes to getting the best rate, it isn’t overly complicated. Plus everything you do to lower your premiums will benefit your health in the long run anyway.

Since the insurer bases your premiums on your risk of death, you should do everything you can do to extend your life.

There are a few things you can do to get better rates:

  • Cut out the junk food and sugary drinks as much as possible.
  • Hit the gym to get healthier and increase your heart health.
  • Quit or limit your bad habits, such as smoking and excessive drinking.
  • Limit risk-taking behaviors or take extra safety precautions.

While all these are important and will certainly help you lower your rates, just starting your policy earlier will already save you more no matter your other risk categories.

The longer that you have to pay your policy, the longer the insurance agency can collect your premiums. If they don’t think they will have to pay out during the policy due to your death, that equals profit for them.

Does term life insurance have living benefits?

There are a lot of companies that offer this program with their base term policies. If you have less than two years left to live, you can claim a portion of the death benefit to take care of any medical bills or expenses that come up.

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These term policies usually have fees or restrictions baked in, so you should be sure of all the conditions before you sign that dotted line. Many companies have a living benefit option. What is a living benefit option?

This option is designed to help customers get benefits even though they haven’t deceased, thankfully. Many times this comes in the form of a rider.

Riders

If your term policy doesn’t offer an accelerated death benefit, you’ll have to pay extra to add it as a rider to your policy. What is a living benefit rider on life insurance?

It’s essentially an extra clause added to your typical term life insurance policy. Make sure you know the conditions and fees associated with your rider to keep from getting surprised later on.

In some cases, even if your policy already offers an accelerated death benefit, you can add a rider to double your coverage.

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Pros & Cons of Living Benefits Life Insurance

Whether you should get a term life policy with an accelerated death or living benefits depends on your life and what you think your future may hold. With it being such a sensitive topic, it’s wise to weigh both the positives and negatives.

Pros and Cons of Life Insurance with Living Benefits

While you can get an add-on rider with almost any insurer, you’ll save much more if you can find a company that includes living benefits with your base policy.

Term Life Insurance For the Living

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!

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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.

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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.

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Keep in mind that a return of premium is a different type of rider that also can help you financially. What happens if I live past my term life insurance? You’ll want a return of premium rider if you think this is possible.

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Term Life Insurance With Living Benefits: The Bottom Line

When deciding to get insurance for your family, you want to make sure that anything the unpredictable future might bring is covered. Whether it be fatal injury or unforeseen illness, you want to make sure that you don’t encounter any urgent medical expenses.

While this type of benefit is very helpful for covering unexpected expenses, it may be subject to only cover certain illnesses.

You may also classify for a percentage of the death benefit early and the lump sum can even cause issues if you receive any social assistance.

If you can get a policy that includes the living benefits at no additional cost, you’ll get a bonus to your coverage. If you can’t find a policy you like with the accelerated death benefit built-in, you can add a rider for an additional cost.

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If you’re worried about the potential for illness, such as with family history or warning signs, this policy will help you make sure that you leave no bills behind while you focus on spending your final days in peace.

Ready to start looking for your term life insurance with living benefits rates? Use our FREE quote tool to get a better idea of what you might have to pay on term life insurance with living benefits and which company for term life insurance with living benefits is for you.

Frequently Asked Questions: Term Life Insurance With Living Benefits

Here are a few additional questions addressed about term life insurance with living benefits:

#1 – What triggers an accelerated death benefit?

An accelerated benefit can be triggered by you or the policyholder reaching out to the insurer with proof of the diagnosis. Some insurers have specific illnesses that they will cover as well as prognosis where the insured has less than a certain amount of time to leave.

#2 – How are accelerated death benefits taxed?

Accelerated death benefits are typically not taxed. However, the influx of additional income can make you ineligible to receive Social Security and other government benefits that you may depend on. Discuss this with the insurance agent before you collect the benefit.

#3 – How can an accelerated death benefit be used for long-term care?

The accelerated death benefit might be able to help with covering the cost of a long-term living facility. This may sometimes be restricted by a percentage of the face value that can be used in specified periods.

This usually covers nurses, home care, and even long-term facilities. If you would like to use this sometime in the future, it’s good to understand any special obligations you have to meet.

#4 – What is quality of life insurance?

Quality of life insurance is just another term for living benefits or accelerated death benefits.

#5 – Is term life insurance or whole life insurance better?

It depends on your finances and situation. whole life insurance is often more expensive but does have some benefits. Follow this link to read more about term life insurance vs. whole life insurance.

Whole life insurance with living benefits will work essentially the same as term life insurance with living benefits. It might be worth researching universal life insurance with living benefits, too.

#6 – Should I purchase long-term care combined with life insurance?

Long-term care insurance provides benefits if you need to enter a nursing home or other care facility. It can be expensive when purchased either on it’s on or in combination with a life insurance policy.

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