The biggest problem I see with people buying term life insurance is the fact that many agents just sell based on price alone. This could hurt you or may not provide you with all of the benefits that a slightly higher rate may offer you.
Even well known life insurance websites are pitching the cheapest term life insurance quotes possible. I don’t see many that mention anything about the benefits of being able to convert the term insurance later, living benefits, or setting yourself up to be in a better position to get paid to sell your policy via a life settlement someday when you no longer need or want the insurance.
Living benefits are the newest trend in the life insurance industry, but very few insurance companies are offering the better living benefits that can deliver cash to you during your lifetime. There are three living benefits that have been introduced, but only a limited number of insurance companies are offering the critical illness and chronic illness benefits mentioned below. Living benefits include:
A) An accelerated death benefit – The ability to receive policy benefits during your lifetime when confronted with a terminal illness. Many companies offer this.
B) Critical illness benefits – A cash payment from your life insurance policy triggered by certain conditions such as heart attack, stroke, or invasive cancer.
C) Chronic illness – A cash payment from your policy when you are no longer able to do two of six activities of daily living (ADL). This provision provides benefits similar to what would be provided by a long term care policy.
Living benefits provide a dramatic change in life insurance because it can provide cash to you during your lifetime and not just benefits for your beneficiary at death.
Below is an example of how by paying a couple dollars more per month could result in you being able to get cash from your life insurance policy while you’re still alive. The rates below are monthly rates for $250,000 of 20 year guaranteed level term for a 50 year old male who does not use tobacco and is in very good health.
$43.28 – Savings Bank Life of MA
$45.69 –ColumbusLife
While Savings Bank Life of MA is a great insurance company and they offer some of the absolute lowest term rates in the country, they currently offer no living benefits on their term products.
Columbus Life is currently offering all three living benefits (accelerated death benefit, critical illness, and chronic illness) in about 38 states right now with about 10 additional states that offer the accelerated benefit now but are pending approval for the critical and chronic illness benefits.
If you purchase a $250,000 Columbus Life policy and you have a heart attack and survive, you can get $25,000 from Columbus Life right away. Likewise, if you have a chronic illness for which you cannot do two of the six ADLs (eating, bathing, continence, dressing, toileting, or transferring) for at least 90 days, you could get up to 40% of your policy or $100,000 while you’re still alive.
For $2.41 more per month, the Columbus Life term rate is a much better value because of the potential for living benefits compared to the Savings Bank Life of MA term rate that offers no living benefits.
Columbus Life won’t be the best insurance company for everyone though. If you are morbidly obese, have health issues like diabetes, or if you’ve had a heart attack, stents placed, bypass surgery, or other health issues, then other insurance companies that offer living benefits besides Columbus Life will probably be better for you.
There are a few more term carriers that offer the three living benefits in most states now, and these other insurance companies may be better for people with existing health issues that want term life insurance with living benefits.
If you don’t think living benefits are that important, consider that there will be 1.4 million heart attacks each year, 1.3 million new cases of invasive cancer each year, and $700,000 Americans are expected to have a stroke this year alone. Also consider that one in four of today’s 20-year-olds will be disabled prior to age 67 according to the social security fact sheet from 2012, and about 50% of all foreclosures and 60% of all personal bankruptcies are caused by medical problems.
To pay such a tiny amount more to have the term insurance with living benefits seems like an obvious choice. The problem is that most insurance agents may not even know about them or may not mention them.
If you know that your family would need life insurance if you die, but you’re not buying it now because you don’t expect to die anytime soon, the life insurance with living benefits may be the ideal life insurance for you. It could help save you and your family from a financial disaster while you’re still alive!