Life Insurance with Living Benefits

Clifford PendellWritten by Clifford Pendell, Managing Partner and Co-founder

A life insurance policy with living benefits can provide a financial safety net for you and your loved ones while you are still alive.

Unlike traditional life insurance policies that only pay a death benefit when you die, life insurance with living benefits provides you with access to a portion of your policy’s death benefit if certain conditions are met.

In this insider’s guide to life insurance with living benefits, we explain the five most common "riders" or lesser known benefits that some policies offer. The article also lists a handful of the best life insurance companies for specific living benefits and coverage options. 

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What is Life Insurance with Living Benefits?

A life insurance policy with living benefits offers capital to the policyowner, while living, if qualifying conditions are met. There are many types of living benefits, but most are designed to provide the insured with financial assistance if they become terminally ill or disabled.

In the next section we have further explained the five most common living benefits in the insurance industry. Most of these benefits are automatically included as a “rider” or add-on to traditional term or permanent life insurance policies.

1. Critical Illness

Critical illness insurance provides tax-free money if you suffer a serious medical issue such as heart attack or stroke. There are no restrictions on how the money must be used and it does not have to be repaid to the insurance company if you outlive your policy.

Companies like Aflac offer critical illness insurance as a standalone product, but most often it is added to a traditional life insurance policy like term life. Some top-rated life insurance companies even offer critical illness protection as a free benefit that is automatically included with the policies they sell.

The amount of money you receive is deducted from your policy’s death benefit when you pass away, so it is important to plan accordingly. Most providers will allow you to access up to 80% of your policy’s death benefit, but if you have more than $500,000 in coverage, there may be additional restrictions.

*Due to state-specific legislation, critical illness insurance is not available to residents of Washington currently.

2. Chronic Illness

A chronic illness insurance rider offers financial protection if you require long term care. This coverage allows you to access your life insurance policy’s death benefit while living to help cover the cost of in-home care or assisted living.

To qualify for this benefit, the insurance company would need proof (doctor’s letter) you require assistance with two or more activities of daily living or suffer from severe cognitive impairment such as Alzheimer’s or dementia. The six activities of daily living include:

  • Eating
  • Drinking
  • Toileting
  • Transferring
  • Bathing
  • Dressing

A handful of top-rated life insurance providers including A+ rated Mutual of Omaha offer chronic illness insurance as free addition to their policies. Most of these providers will allow you to access up to 80% of your policy’s death benefit, and you are not required to repay this amount if you outlive your coverage.

However, if you die before your policy expires, your coverage will be reduced by the amount of money accelerated to you. Most standalone policies only pay for care from a licensed provider. Policy riders tend to have less restrictions for those that hope to receive care from their spouse or a family member.

3. Accelerated Death Benefit

An accelerated death benefit is a standard rider with most policies that accelerates a portion of your death benefit if you become terminally ill with 6-12 months life expectancy depending on the carrier.

This living benefit works almost exactly like a critical illness rider, and if you outlive your policy, you do not have to repay the money you receive. However, your policy’s death benefit will be reduced by the amount of money received while living.

Most top-rated life insurance companies including John Hancock, AIG, Prudential, and Mutual of Omaha offer a free accelerated death benefit rider with the policies they sell. Accelerated death benefits are not offered as standalone coverage, they must be attached to a term or permanent life insurance policy.

Most insurance providers will allow you to accelerate 50-80% of your policy’s death benefit up to $750,000. This is untaxed money paid out in a lump-sum, and it can be used however you see fit. Medical care, lodging, or even that once in a lifetime vacation you have always dreamed about.

4. Waiver of Premium Disability Rider

A waiver of premium disability rider will waive premiums on your life insurance policy in the event you become disabled. This benefit usually continues until death, their policy ends, or at the age of 70.

According to the Social Security Administration, about 25% of people will experience a disability lasting at least 12 months during their working years. While this might seem like enough of a risk to justify the extra expense for this rider, it is important to pay attention to the fine print.

Most waiver-of-premium riders have an elimination period of six months. During this time, you are still responsible for paying premiums on your life insurance policy. When you consider the added cost of this benefit, and the limited circumstances where it could aid, you might decide to save your money instead.

5. Return of Premium

A return-of-premium rider is unlike other riders on this list because it is not triggered by a health issue. This living benefit will refund all the premiums you paid if you outlive the term you selected.

This rider provides free life insurance to the policyholder while building a savings. The downside to return of premium life insurance is that it is more expensive than traditional term life insurance because the company must make enough interest from the premiums to offset the cost of the coverage.

There is more risk associated with these policies because if you miss a payment, and don’t catch up in-time, you will lose your life insurance protection and your savings. In addition, very few providers offer a return of premium rider so it could be harder to secure coverage if you have some health issues.

Pros and Cons of Life Insurance with Living Benefits

Life insurance with living benefits can be invaluable to someone who becomes terminally ill or requires long term care. With some life insurance providers these benefits are automatically included with the policies they sell at no additonal cost to the policyholder. 

This is an obvious pro because it provides the insured with financial protection that they can access if they are diagnosed with a qualfying condition. With most life insurance providers, this money can be used however the policyholder chooses; whether its traveling to medical providers for the best care, or taking a vacation with family.

In addition, if you outlive your policy, you are not required to repay this money to your life insurance provider, it is yours to keep. The benefit is also paid as a tax-free lump sum.

The biggest con to life insurance with living benefits is a reduced death benefit. Your life insurance policy's death benefit will be reduced by what you access when you are living, or more. Ultimately this mean less money for your loved ones when you are gone. 

Another potential downside to life insurance with living benefits is variable reduction rates. Essentially these rates penalize policy holders for accessing their life insurance policy's death benefit early. These rates typically average about 4% per year further reducing the amount of money you intended to leave behind. 

Best Life Insurance with Living Benefits

After reviewing more than 60 top-rated life insurance companies our experts have determined these are the 5 best life insurance companies offering living benefits to their policyholders.

Prudential – Best Term Insurance with Living Benefits

Mutual of Omaha – Best Whole Life Insurance with Living Benefits

eLife – Best No Exam Life Insurance with Living Benefits

Assurity – Best company for Return of Premium Life Insurance

Pacific Life - Best Company for Waiver of Premium Life Insurance

We have further explained each of these policies in the sections below.

Term Life Insurance with Living Benefits

Prudential offers the best term life insurance policy with living benefits. Their Term Essential plan automatically includes a “Living Needs Benefit” rider that will accelerate up to 75% of your death proceeds if you are diagnosed with a qualifying condition.

These medical conditions include a heart attack, the need for heart bypass surgery, kidney failure, a stroke, and in some states; a vital organ transplant, or if you are confined to a nursing home for six months and expected to be there for the remainder of your life. In other words, it offers some coverage for chronic and critical illnesses.

There is no penalty for accessing this money early, but like other living benefits, the amount of money you access will be deducted from your policy’s death benefit if you pass away. Like chronic and critical illness riders, accelerated living benefits do not need to be repaid if you outlive your policy.

To learn more about Prudential’s term life insurance products, please give us a call at 855-247-9555. You can also compare term life insurance rates from Prudential and dozens of other providers by entering your information in the free quote form below. It takes less than a minute and there is no obligation.

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Best Whole Life Insurance with Living Benefits

Mutual of Omaha currently offers the best whole life insurance with living benefits in the marketplace. Their living benefit rider provides free critical and chronic care protection that accelerates up to 80% of your policy’s death benefit while living.

Like other chronic illness riders, the assisted living benefits offered by Mutual of Omaha can be accessed if you are unable to perform two or more of the six activities of daily living or if you have been diagnosed a cognitive impairment that requires supervision.

Mutual of Omaha’s critical care rider offers financial assistance if you have been diagnosed with a serious health condition such as a heart attack, stroke, major organ failure, kidney failure, ALS, life-threatening cancer, dementia, major burns, AIDS, or aortic aneurysm surgery.

In addition to critical and chronic care coverage, Mutual of Omaha’s Living Benefits also offer a free terminal illness rider that accelerates up to 80% of your policy’s death benefit if you are diagnosed with a condition that shortens your life expectancy to 12 months or less.

*Please note that the critical and chronic care riders are subject to variable reduction rates that are determined by the insured’s lifetime expectancy.

Best No Exam Life Insurance with Living Benefits

The eLife Express policy offers $100,000 to $500,000 of term life insurance for people up to age 70. No medical exams or blood draws are required, the entire process is completed online. In fact, most qualified applicants will receive an approval in as little as 20 minutes.

While the eLife does not offer chronic or critical care riders with their term life insurance policies, they do offer a free accelerated death benefit rider that accelerates up to 50% of your policy’s face value, $250,000 max. A waiver of premium rider can also be added for an additional cost.

The downside to these policies is that they tend to be more expensive for older folks. They are also less lenient with health issues that other providers might approve. In addition, coverage options are limited. For example, eLife’s cut-off age for a 20-year term is 60, while many providers offer a 20-year term until 70.

To learn more about no exam life insurance with living benefits, please give us a call toll-free at 855-247-9555. Our agency is appointed with 63 top-rated life insurance companies. We can quickly determine your best options for affordable coverage based on your needs, budget and health profile.

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Best Return of Premium Life Insurance Policy

As a result of historically low interest rates, there are only a few life insurance carriers who still offer a return-of-premium rider. Currently, Assurity offers the best return of premium rider in the industry to applicants under the age of 53.

Assurity is an A (Excellent) rated company that has been in business since 1964. They offer lenient underwriting to applicants in less than perfect health and very competitive life insurance premiums. In fact, in some cases they are about 30% less than their competitors.

Typically, a 20-year term is the shortest term-length you can add a return-of-premium rider on. Opting for a shorter duration with a return-of-premium rider decreases the chances of you losing your policy if you fall on hard times and need to cancel your policy. In the table below we have compared Assurity’s Return of Premium rates to another provider.

Return of Premium Rates for A Healthy 45 Year-Old - $500,000 fixed for 30 years

Gender      Assurity      Cincinnati Life
Male$207.07$293.48
Female$169.21$194.04
*Displayed monthly rates are accurate as of 01/11/2023 and are provided for illustrative purposes only.

To compare return of premium life insurance policies and rates, give us a call toll-free at 855-247-9555 or request a free quote using the form below. In less than a minute you can compare life insurance rates and policy options from dozens of leading providers.

How Much Does Life Insurance with Living Benefits Cost?

Most life insurance companies include living benefits with the policies they sell. The most common is an accelerated death benefit that accelerates a portion of your death benefit early if you become terminally ill.

A return-of-premium rider on the other hand can cost significantly more, but remember this money is returned in-full when your policy ends. In the table below we’ve compared the monthly cost of a 20-year, $500,000 term life insurance policy to a 20-year, $500,000 term policy with return of premium.

Current Age      Gender      With Return of PremiumWithout Return of Premium
35Male$86.57$20.36
35Female$69.60$17.38
40Male$141.24$28.42
40Female$108.75$24.06
45Male$220.44$42.49
45Female$169.21$36.23
50Male$350.62$69.91
50Female$267.53$54.84
55Male$529.84$107.46
55Female$406.73$83.28
60Male$849.56$200.71
60Female$642.06$141.36

*Monthly rates are accurate as of 01/11/2023 and are provided for illustrative purposes only. 

As you can see the cost of a 20-year term life insurance policy with a return-of-premium rider is significantly more expensive than an identical policy without one. For most people, this increased cost makes return-of-premium riders not worth the cost.

However, if you are already maxing out your pre-tax retirement options, and have little to no debt, this could be a great option to help you set more money aside for your future. Just remember, if for any reason you are unable to continue making payments, your money and coverage will be lost.

The Bottom Line

Life insurance with living benefits provides you with financial protection while you are living. That is why it’s often referred to as, “Life insurance you don’t have to die to benefit from.” Some companies offer these riders for free or as an add-on to the policies they sell for an additional cost.

We rarely recommend spending extra money on living benefits, but if deciding between two companies, consider the riders they include with their policies before you make your decision. This could be especially beneficial for those with a family history of terminal illness or disability.

At JRC Insurance Group we are appointed with 63 top-rated life insurance companies. Our experts offer at least 10 years of experience, and we can quickly determine which companies offer the benefits you need at the lowest price. Call us today at 855-247-9555 or click on your state below to get started.

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Clifford Pendell

Clifford Pendell

Managing Partner and Co-founder

Cliff is a licensed life insurance agent and one of the owners of JRC Insurance Group. He has helped thousands of families of businesses with their life insurance needs since 2012 and specializes with applicants who are less than perfect health. In his spare time he enjoys spending time with family, traveling, and the great outdoors.

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