When most of us buy life insurance, we aren’t thinking of ourselves. We’re thinking of those we love, protecting our families if something tragic were to happen to us. This is the primary reason for purchasing life insurance.
Life insurance riders are typically add-ons to the policy that allow you to choose additional features, so you can customize life insurance coverage to meet your specific needs. Some riders are inherent to a policy and others are available at additional cost, and/or may involve a fee when exercised. Some life insurance companies offer policies with “living benefits riders.” These riders provide benefits that can offer value to you while you’re living. A living benefits rider provides added services that can be accessed while you’re living.
Living benefits riders that make life less hard
With term life insurance, the interaction that most people have with their life insurance company is a monthly bill for 10 to 30 years. You pay your monthly premiums and hope your family will never have to use it. For the team at Haven Life, that seemed like a missed opportunity.
That’s why Haven Life put a new twist on riders that offer living benefits with Haven Life Plus. Included in the cost of each Haven Term policy, issued by MassMutual, Plus provides policyholders with access to benefits (based on state availability) to help them live healthier, fuller and more protected lives.
Access to the following services are available through Plus:
- Aaptiv is an audio-based, on-demand fitness app with thousands of workouts in a variety of popular categories including running, strength training, yoga and meditation.
- LifeSite provides a secure online safe deposit box for storing, managing and sharing your family’s important documents at no cost.
- MinuteClinic offers a 15 percent discount voucher for family health services inside CVS Pharmacy and Target stores.
- Timeshifter uses the latest research in sleep and circadian neuroscience to help you create a personalized travel plan for alleviating the symptoms of jet lag.
- Trust & Will is a digital solution that drafts legal wills for you and your partner at no charge. The service also includes a healthcare power of attorney and directives.
Accelerated death benefit
As previously stated, a common rider that offers a living benefit is known as the “accelerated death benefit rider.” Let’s say you have a terminal illness while you have an active life insurance policy. You’ll certainly be glad to know that you have the life insurance coverage for your family beneficiaries. But in the meantime, loss of income or increased expenses (such as medical bills that are not covered by health insurance) could deplete your family’s assets or even result in debt before you pass. Your debt would then need to be settled by your estate.
An accelerated death benefit rider allows you to receive an advance of a portion of the available policy’s death benefit early if you are diagnosed with a terminal illness expected to result it death withing the time period noted in the rider, generally 12 months, which could make your last days easier. Typically, you need a diagnosis that gives you one year or less to live. A portion of the death benefit is paid out to you to use as you wish – to help cover medical bills, pay shared debts, getting your affairs in order, or even memorable experiences with your family.
Most, but not all, basic life insurance policies offer this rider as an inherent benefit of your policy, which means it’s included in the price of your monthly premium. Generally, an administrative fee is charged if the rider is exercised.
And the amount of your policy that insurance companies allow you to access for this type of benefit varies. For example, Haven Term policyholders can access up to 75 percent of their benefit, or a maximum of $250,000, whichever comes first. Accessing these benefits reduce the payout to your beneficiaries upon death dollar-for-dollar.
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Disability waiver of premium
Waiver of premium is another common rider that offers a living benefit. This rider will waive premiums for the policy and any eligible riders if the policyholder becomes totally disabled as described in the rider. This helps prevent your life insurance policy from lapsing. Usually, this rider can be added at an additional fee to your premium. Policies vary, and there may be age or state availability limitations that apply.
The Social Security Administration found that one in every five Americans lives with a disability, so the possibility of meeting the definition of total disability at some point is more common than you might think.
Depending on the rider, it could cover you for specified number of months, or up to a certain age. The individual terms of the rider vary from carrier to carrier. Additionally, there are no fees associated with using this benefit (that’s what the added premium cost covers.) But, there may be a waiting period before you can file a claim to use this rider.
Other types of riders that offer living benefits
While the accelerated death benefit is the most common type of rider that offers a living benefit, there are other specialized riders.
A long-term care rider can cover the cost of a nursing home or in-home nurse as you age. Usually attached to the more expensive whole or permanent life insurance policies, this coverage can help supplement a stand-alone long-term care insurance policy while also providing a death benefit.
Then there’s the disability income insurance rider. This rider acts like long-term disability insurance, but instead of buying a separate policy, it’s a rider on your life insurance coverage. If you were to become disabled and unable to work, the life insurance company would pay you a monthly stipend to replace a portion of your income. Additionally, premiums for the life insurance coverage may be waived while the policyholder is receiving disability benefits.
With the critical illness rider, benefits are paid to the policyholder to cover treatment for illnesses specified in the policy contract, which could include any number of critical medical conditions that are likely to limit your life expectancy.
You should know that claims paid from policies with riders like these will reduce the policy’s death benefit and cash surrender value of the policy. When the policyholder dies, his or her beneficiaries will receive a reduced amount that reflects the money already used to help pay claims.
Finding the policy that works best for you
A living benefits rider is like a sidecar to your life insurance policy to help improve your benefit options while you’re still living. Depending on the rider, it can add enhancements to your coverage to add support to more areas of your life. Not every person needs every rider available to them.
No one wants to read the fine print when buying a life insurance policy. But you don’t want to miss out on benefits that could make your life better.
Always check to see what riders are automatically included with the price of your life insurance – like the accelerated death benefit and Haven Life Plus riders with the Haven Term policy. You might find that your life insurance policy could benefit you as well as your loved ones.
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Chelsea Brennan is the founder of Smart Money Mamas, a personal finance blog that focuses on family finance, investing, and reducing money stress. Chelsea is an ex-hedge fund investor whose work has appeared in a wide array of publications, including Forbes, Business Insider, and more.
Some riders are available at an additional cost or may have fees when exercised. Certain conditions will apply to each rider.
Haven Life Plus (Plus) is the marketing name for the Plus rider which is included as part of the Haven Term policy. The rider is not available in every state and is subject to change at any time. Neither Haven Life nor MassMutual are responsible for the provision of the benefits and services made accessible under the Plus Rider, which are provided by third party vendors (partners).