Living benefits have been around since the 1980s and have evolved over the years to include chronic illness, critical illness, and terminal illness provisions that allow a life insurance policyholder to access a percentage of the death benefit or cash value if the policyholder has what the insurance company deems a "qualifying event". Most insurance companies consider a qualifying event to be the inability to perform two of the six activities of daily living, this consists of eating, bathing, getting dressed, toileting, transferring, and continence.
Why the need for Living Benefits?
The simple fact is that any of these illnesses can strike anyone at any time. Most people are not prepared for a chronic, critical, or terminal illness. Oftentimes people think that they have a health insurance or disability insurance and they will be sufficiently covered in case of a sudden or serious health problems such as a heart attack, stroke or cancer diagnosis.
The reality is that this is simply not true. Many Americans struggle with medical expenses. One in five Americans who have health insurance struggle to pay off their medical debt. For cancer patients with insurance, out of pocket costs can reach $12,000 just one medication and average treatment costs can hit $150,000 according to the Kaiser Family Foundation.
Regardless your age, income, or what kind of health coverage you have, 2 things are inevitable in the case of an unexpected illness: your expenses will go up, and your income will do down, which can result in crippling a family financially.
In next blogpost, we will discuss how insurance companies determine the amount of benefits that will be provided.