Accessing flexible life insurance benefits while you’re still living
The main reason for buying life insurance is to provide financial security for the people you love after you die. But did you know many policies offer flexible life insurance provisions and/or policy riders that will allow you to access some of the benefits in your policy while you are still alive?
The accelerated death benefit
If you were to become terminally ill, an accelerated death benefit may allow you to exchange your death benefit for a payment that's equal to the face value of your life insurance policy. However, every insurer is different, and most only pay a portion of your death benefit up to a certain maximum dollar amount. Then, when you die, the insurer will pay the balance of the death benefit remaining in your policy to your beneficiary(s). Again, depending on the insurer and the type of policy you have, you may only be able to access this benefit if you have 12 months or fewer to live.
Waiver of premium rider (WoP)
If you suffer a serious illness or prolonged disability and are unable to afford your life insurance premiums, the WoP or waiver of premium rider will allow you to stop making your premium payments and still keep your life insurance policy in force. Premiums will continue to be waived until you make a full recovery. Depending on the insurer and the type of policy you have, it's best to review your contract's specific language as it pertains to WoP.
Cash value accumulation in permanent life insurance policies
Permanent* life insurance policies such as whole life or universal life, have the potential to earn cash value over time. You can let this cash value accumulate in order to take out a policy loan (as long as there is enough cash value available to borrow) for whatever you may need while you're still alive. However, if you don't pay back 100% of the amount you borrow, what you owe will be subtracted from your death benefit along with any unpaid interest.
* As long as required premiums are timely made.