• Home
  • E-Booklets
  • Pay Less Tax
  • Privacy Policy
  • Cheatsheets
  • Contact Us
  • About us

Retirement Income

New Ways to Get More Retirement Income

  • Retirement Advisors
  • Retirement Insurance
  • Retirement Investing
  • Retirement Living
  • Retirement Planning

Life Insurance - You Don’t Need to Die to Get Paid

Posted on January 24, 2012 by bobrichards

Many life policies offer accelerated benefits (often called living benefits) that pay off during the life of the policy owner. Those benefits are accelerated if they are paid directly to a chronically or terminally ill policy owner before he or she dies. Provisions for accelerated or "living benefits" may be included in a policy when purchased or attached as a rider.
Certain medical circumstances can trigger eligibility for early payment of all or a portion of your policy's proceeds, including:

  • Terminal illness, with death expected within 24 months.
  • Acute illness, such as acute heart disease or AIDS, which would result in a drastically reduced life span without extensive treatment.
  • Catastrophic illness requiring extraordinary treatment, such as an organ transplant.
  •  Long-term care needed because you cannot perform a number of daily living activities, such as bathing, dressing, or eating.
  • Permanent confinement in a nursing home.

Some people are surprised that such a benefit is available thinking that they would not be insurable if ill. While that is likely accurate, the time to get a life insurance policy with the living benefits rider is when you're in good health. Once insured, that policy is yours for life as long as premiums are paid.
In general, accelerated benefits can range from 25 to 95 percent of the death benefit. The payment depends on your policy's face value, the terms of your contract, and the state you live in. Some companies will permit you to accelerate 100 percent of your policy's face value, but will reduce the amount of your benefit to compensate for the interest it loses on early payout. The amount of your benefit will also be reduced by any outstanding loans against your policy.
In most cases accelerated benefits are not subject to federal income taxes. Under the federal tax code, a terminally ill person (defined as a person having only 24 months to live) would not have to pay taxes on accelerated benefits. A chronically ill person is usually exempt but may have to qualify for the exemption by being certified each year. To ensure compliance with current tax laws, check with a local tax advisor.
What happens when you die? Let's say you have a policy with a death benefit of $500,000 that makes 100% of the benefit available as accelerated benefits and you receive $200,000 as accelerated benefits during your lifetime. At death, your heirs receive the remaining $300,000. Essentially, the amount paid to your beneficiary is reduced by the amount you received as an accelerated benefit. If your policy's proceeds are entirely depleted, no benefit is paid after your death.
Want to see an illustration? Ask your insurance agent or financial advisor.

Everything You Don’t Know About How to Use Life Insurance to Make Money

  • Five ways that wealthy people use life insurance to retain and create wealth
  • How to convert an existing life insurance policy into more money than the insurance company valuation
  • Why you never want to be the owner of a policy that insures you
  • A huge and common mistake when selecting a life insurance beneficiary
  • They don’t talk about these “insider” strategies on CNBC or in Money magazine. Get the free guide to open up a new horizon of financial awareness.

    You might also like:

    • Use Life Insurance in Estate Planning to Treat Beneficiaries EquallyUse Life Insurance in Estate Planning to Treat…
    • Estate Financial Planning Has Nothing to Do With Your WealthEstate Financial Planning Has Nothing to Do With Your Wealth
    • Retirement AgeRetirement Age
    • How Retirees Can Use Tax Reform to Their Advantage (and other senior tax breaks from 2017)How Retirees Can Use Tax Reform to Their Advantage…
    • You May Have to Pay Your Neighbor's Retirement PensionYou May Have to Pay Your Neighbor's Retirement Pension
    • Info Your Executor or Personal Rep Will NeedInfo Your Executor or Personal Rep Will Need

    Filed Under: Estate Planning

    About bobrichards

    Bob Richards
    Editor | Involved in Various Marketing Positions within the Financial Services Industry

    Leave a Reply Cancel reply

    Second place winner best retirement blog

    SH award winner SMALL (1)

    Not Enough Savings to Retire?
    Learn Six Ways to Earn Retirement Income (from home)

    You do not need special talents, skills, computer knowledge, etc. We show you multiple ways others are working a few hours a week to generate a comfortable retirement income.

    Download Free Copy

    Latest Posts

    Update on Social Security Cash Flow

    Update on Social Security Cash Flow

    What's the True Cost of Senior Healthcare

    What's the True Cost of Senior Healthcare

    Social Security Office Cheating Retirees

    Social Security Office Cheating Retirees

    Use Life Insurance in Estate Planning to Treat Beneficiaries Equally

    Use Life Insurance in Estate Planning to Treat Beneficiaries Equally

    Estate Financial Planning Has Nothing to Do With Your Wealth

    Estate Financial Planning Has Nothing to Do With Your Wealth

    Categories

    • 401K IRA Roth Withdrawals, Distributions, and Rollovers
    • Annuities for Income
    • Estate Planning
    • Retirement Advisors
    • Retirement Insurance
    • Retirement Investing
    • Retirement Living
    • Retirement Planning
    • Social Security
    • Supplemental Retirement Income
    • Tax Savings
    • Alternative Investments
    • E-Booklets
    • Pay Less Tax
    • Privacy Policy
    • Cheatsheets
    • Contact Us
    • Subscribe
    • Sitemap

    Recent Posts

    • Update on Social Security Cash Flow
    • What's the True Cost of Senior Healthcare
    • Social Security Office Cheating Retirees
    • Use Life Insurance in Estate Planning to Treat Beneficiaries Equally
    • Estate Financial Planning Has Nothing to Do With Your Wealth

    The Retirement Income Blog

    25A Crescent Drive #1508
    Pleasant Hill CA 94523
    T: 844-887-4131
    E: [email protected]

    © 2018 Retirement Income