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Understanding how living benefits help in life insurance policy

Sudhir Mathuria HEALTHLIFE 360 713-771-2900

Sudhir Mathuria

Living benefits are generally associated with permanent (cash value) life insurance policies.But even term life insurance policies can be purchased with one or more riders, which will pay you money while you’re still alive—under certain circumstances. Those circumstances all have to do with illness:
1. If You are terminally ill. You can receive a portion of your death benefit in advance, for help with medical expenses, one final around-the-world fling, or whatever.
2. If You are chronically ill. Frequently you’re considered chronically ill if you can’t perform several of the six activities of daily living, such as getting out of bed, feeding yourself, bathing, and so forth. You can receive a portion of your death benefit in advance, in situations like this.
3. You’re critically ill. That could mean you’ve been diagnosed with a heart attack, stroke, cancer, end stage renal failure, major organ transplant, or some other pretty grim illness. Again, you can get some or all of your death benefit early—in time to be of some use to you
These are called accelerated benefit riders. They affect only when the insurance company pays the money. They don’t affect how much is paid.
That means, for example, that if you have a $100,000 death benefit, and you receive $75,000 prior to your death because you qualified under one of these riders, when you actually do pass away, the insurance company will pay only the remaining $25,000. They’ve already paid $75,000; they won’t pay that again.
Now, let’s go beyond term life insurance, to see what living benefits are available on the other broad type of life insurance, permanent life insurance.
How Living Benefits Help in Permanent Life Insurance
First the good news: the same types of accelerated benefit living benefits available for most term life insurance policies are also available for most permanent life insurance policies.
Now for the even better news: Many permanent life insurance policies offer living benefits that go far beyond what’s available with term insurance. In some cases, these benefits do not subtract from the death benefit, as accelerated benefits do. They’re in addition to whatever death benefit is paid upon your passing.
Permanent life insurance policies can do this because they build equity, called “cash value,” that accumulates over time. This accumulation of cash value, along with tax advantages available with a permanent life insurance policy, allows you to enjoy “living benefits,” including:
• Guaranteed, tax-deferred growth. With a permanent life insurance policy of the whole life variety, your cash value is guaranteed to grow and to never decline in value. It contributes to your financial security with stable yet consistent growth that supports your financial goals.
• Collateral for policy loans. The cash value you accumulate is an asset on your balance sheet. You may borrow money against your life insurance policy, using the cash value and death benefit as collateral, at any time and for any reason. Some examples of reasons Bank On Yourself policy owners have borrowed money (Note: you’re not required to explain why you want the loan, but owners like to brag to us!) include:
• Purchase a home
• Invest in a business or commercial property
• Handle a financial emergency
• Provide a steady stream of supplemental income in retirement
Flexible funds for retirement. You can use your permanent life insurance cash value to supplement your retirement income without the requirements and limitations that apply to 401(k) and IRA retirement accounts. You have several choices, including receiving your dividends in cash, surrendering paid-up additions that you purchased along the way, or taking a policy loan (all of which may have tax consequences or affect the death benefit).
• College savings. Life insurance cash value is one of the few assets not considered in federal college financial aid calculations. Families with college-age children who have permanent life insurance policies not only can use the policy’s cash value (via policy loans) to pay college tuition and housing expenses, but also might benefit from greater financial aid opportunities, compared with families with a similarly-sized 529 Plan.

For complete review and individual or family planning contact Sudhir Mathuria 713-771-2900. Read complete report online:www.voiceofasiaonline.com•

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