It lets you get part of your death benefit while you are still alive if you become terminally ill, and some policies also cover serious illness or long term care.
This is also called a living benefit. It is added to a policy as a rider or built in.
The most common reason is a terminal illness. Some policies also cover a major illness, an organ transplant, or the need for long term care.
Insurers may pay 25 to 100 percent of the death benefit early. Whatever you take is subtracted from what your family gets later.
Some insurers charge a small extra premium. Others include it for free but take a fee or a smaller payout when you use it.
For the terminally or chronically ill, the IRS says this money can be tax free if certain rules are met.
- Terminal illness
- Major illness, like an organ transplant
- Long term care needs
- Permanent nursing home stay
More questions
Will it lower what my family gets?
Yes. The amount you take early comes out of the death benefit.
Can it affect Medicaid?
It can. Once you take the money, it may count as income for Medicaid.
Is it health insurance?
No. It does not replace health or long term care insurance.
