Five Ways Life Insurance Can Pay Off Before You Die

You may consider life insurance to be a fairly straightforward product: pay your premiums and the beneficiary receives the stated benefit after your death. However, there are several life insurance policy riders that can pay significant financial benefits during your lifetime.

A rider to an insurance policy is an amendment or addition to the policy that provides a specified incremental benefit.

Accelerated Death Benefit Rider. If your life insurance policy has an accelerated death benefit (sometimes called a living benefit) rider, you may be able to access all or part of its death benefit if you are diagnosed with a terminal illness or if you require long-term or permanent nursing home care. Some policies automatically include this benefit, but, in some cases, you may have to add it. Accelerated death benefits could be invaluable to you and your family at a time when extra funds are needed to ensure that you receive the best care possible and/or want to take steps to ensure your family's financial future.

Long-Term Care Rider. A long-term care rider on a life insurance policy for which you are the insured allows you to receive funds to pay for the cost of an assisted living facility or nursing home for yourself. There are two kinds of long-term care riders, an accelerated benefits rider and an extension rider. The accelerated benefits rider allows you to take an advance on the policy's death benefit, but is limited to the amount of the death benefit. An extension rider increases the policy's long-term care coverage above the amount of the death benefit.

Waiver of Premium Rider. This life insurance policy rider will pay your premiums in the event that you can't for specified reasons, such as serious illness or disability.

Disability Income Rider. A disability rider on a life insurance policy provides a specified level on income in the event that the insured becomes disabled and unable to work. Disability payments continue as long as the insured is disabled or up to a period of time specified in the policy.

Guaranteed Insurability or Guaranteed Renewal Rider. This rider guarantees that you can add coverage to your life insurance policy, usually at specified times, without proof of insurability (that is, without a medical exam). If you have a term policy, it also guarantees that you can renew the policy without proof of insurability. These options can be extremely valuable if your health deteriorates due to illness or accident during the term of the policy, essentially making you uninsurable.

For many people, life insurance policy riders can be a worthwhile investment. However, adding a rider to a life insurance policy will cost extra and accessing a policy's death benefits early may have tax consequences, so be sure to consult your financial advisor before buying these products. Also, be sure that you understand the requirements for payout on and the limitations of any rider you purchase since these will vary by company.

Sources:

Amy Danise, http://www.insure.com/articles/lifeinsurance/did-not-know.html, Insure.com - 6 things you didn't know your life insurance covers

www.insure.com/long-term care, Life insurance riders can pay for long-term care

www.bankers.com, Life Insurance - Rider - Bankers Life and Casualty