Living Benefits: Life Insurance You Don’t Have to Die to Use
How Life Insurance May Help Protect Your Finances During a Qualifying Serious Illness
By Fortis Insurance Solutions
One Plan. Four Pillars. Protect. Retire. Bank. Leverage.
Most people understand the traditional purpose of life insurance.
If you pass away while the policy is in force, the insurance company pays a death benefit to your beneficiaries. That money can help protect your family, replace lost income, pay debts, and preserve the plans you were building together.
But death is not the only event that can disrupt a family’s financial future.
A serious illness may prevent you from working, increase household expenses, require help from family members, and force you to use savings intended for retirement or other long-term goals.
You may survive the illness—and still experience significant financial damage.
That is why certain life insurance policies offer living benefits, also known as Accelerated Benefit Riders.
These riders may allow you to access a portion of your life insurance death benefit while you are still living after experiencing a qualifying terminal, chronic, or critical illness.
The Financial Risk Many Families Overlook
Most financial plans depend on one major asset:
Your ability to earn an income.
Your income pays the mortgage, supports your family, funds retirement accounts, covers insurance premiums, and keeps the rest of your financial plan moving forward.
When income stops because of an illness, the effects can spread quickly.
Health insurance may help cover medical treatment, but it generally does not pay for every financial consequence surrounding the illness.
A family may still need money for:
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Mortgage or rent payments
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Utilities and household expenses
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Credit cards and loans
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Travel for specialized treatment
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Childcare or caregiving
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Home modifications
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Lost income for a spouse
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Business expenses
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Everyday living costs
Without another source of funds, families may be forced to withdraw retirement assets, sell investments, increase debt, or exhaust emergency savings.
Living benefits may provide another financial resource during that difficult period.
What Are Living Benefits?
Living benefits are provisions within certain life insurance policies that may allow the policyowner to accelerate a portion of the death benefit before the insured person passes away.
They may be available with certain term or permanent life insurance policies, depending on the insurance company and the contract.
If a qualifying medical event occurs, the policyowner submits a claim with the required medical documentation. If approved, the insurance company determines how much of the death benefit may be accessed.
The benefit may help provide financial stability while the insured person focuses on treatment, recovery, and family.
However, not every illness qualifies. Definitions, benefit amounts, exclusions, and claim requirements vary significantly by policy.
The actual insurance contract determines when benefits are available.
The Three Primary Types of Living Benefits
Living benefit riders commonly address three categories:
Terminal Illness
Chronic Illness
Critical Illness
Terminal Illness Benefits
A terminal illness rider may allow access to a portion of the death benefit when the insured person is diagnosed with an illness or medical condition expected to result in death within a specified period.
Depending on the policy, that period may be 12 months, 24 months, or another stated timeframe.
The benefit could potentially help:
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Replace lost income
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Pay household expenses
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Reduce debt
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Obtain additional care
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Protect savings and investments
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Complete estate-planning objectives
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Spend meaningful time with family
Using the rider will generally reduce the death benefit eventually paid to beneficiaries.
Chronic Illness Benefits
A chronic illness rider may provide access to the death benefit when the insured person experiences a qualifying loss of independence or severe cognitive impairment.
A common qualification is the inability to perform at least two of the six Activities of Daily Living without substantial assistance:
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Bathing
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Dressing
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Eating
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Toileting
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Transferring
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Continence
Severe cognitive impairment may also qualify when substantial supervision is required to protect the individual’s health or safety.
Chronic illness riders can differ considerably. Some require the condition to be permanent, while others require it to be expected to continue for a specified period.
A chronic illness rider should not automatically be considered long-term-care insurance. Although the benefits may use similar qualification standards, the policies can have different protections, limitations, and payment structures.
Critical Illness Benefits
A critical illness rider may allow the policyowner to accelerate a portion of the death benefit following a qualifying medical diagnosis or event.
Depending on the policy, covered conditions may include:
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Heart Attack
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Stroke
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Invasive cancer
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Major organ transplant
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End-stage renal failure
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Paralysis
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Blindness
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Other specifically defined conditions
The diagnosis alone may not always be enough.
The policy may require a specific level of severity, measurable impairment, or detailed medical evidence.
The policy language determines whether a condition qualifies.
How Living Benefits May Be Used
Living benefits are not designed only for medical bills.
Their broader purpose is to create liquidity when a serious illness threatens the financial structure surrounding the insured person.
The money may potentially be used to:
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Replace income
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Keep housing payments current
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Pay household expenses
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Avoid premature retirement withdrawals
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Reduce reliance on credit cards
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Cover caregiving or home assistance
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Pay for treatment-related travel
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Allow a spouse to take time away from work
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Maintain insurance premiums
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Protect a family-owned business
This flexibility can help families avoid making major financial decisions while under emotional and medical pressure.
Living Benefits Reduce the Death Benefit
A living benefit is generally an acceleration of the policy’s existing death benefit.
It is not usually an additional pool of money placed on top of the original coverage.
For example, suppose a policy has a $500,000 death benefit. If part of that benefit is accessed during a qualifying illness, the amount later available to the beneficiaries will generally be reduced.
The amount received may also be affected by:
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The percentage accelerated
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Administrative charges
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Actuarial discounts
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Interest calculations
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The insured person’s age
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The severity of the condition
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The rider’s benefit formula
The policyowner may not receive one dollar for every dollar of death benefit accelerated.
These calculations should be understood before purchasing the policy.
“No Additional Premium” Does Not Always Mean “No Cost”
Some insurance companies include certain living benefit riders without charging a separate rider premium.
However, this does not necessarily mean there will be no financial cost when the benefit is used.
The insurance company may apply:
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An actuarial discount
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An administrative fee
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Interest charges
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A lien against the policy
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A reduction to the cash value
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A reduction to the remaining death benefit
Other riders may charge an additional premium but provide a more clearly defined benefit.
The appropriate structure depends on the policyowner’s goals, budget, and need for benefit certainty.
Living Benefits Do Not Replace Other Coverage
Life insurance with living benefits can be an important part of a protection strategy, but it should not be treated as a replacement for every other form of insurance.
Health insurance is designed primarily to help pay qualifying medical expenses.
Disability income insurance is designed to replace a portion of income when an illness or injury prevents someone from working.
Long-term-care insurance is designed specifically to help cover qualifying care needs.
Standalone critical illness insurance may provide a separate benefit following a covered diagnosis.
Each form of protection performs a different job.
A properly coordinated strategy may use several types of insurance to address different risks.
Potential Tax Considerations
Certain accelerated death benefits paid because an insured person is terminally or chronically ill may receive favorable federal income-tax treatment when applicable requirements are met.
However, tax treatment may depend on:
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The type of rider
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The qualifying medical condition
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How the benefit is paid
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Who owns the policy
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Who receives the payment
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Whether the policy is personally or business owned
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Whether other benefits are being received
Receiving living benefits may also affect eligibility for certain public-assistance programs.
Policyowners should consult a qualified tax or legal professional regarding their individual circumstances.
Why Living Benefits Belong in the Protect Pillar
Within the Fortis Legacy Diamond, Protect is the foundation.
Before you can build retirement assets, create cash-flow strategies, eliminate debt, leverage capital, or transfer wealth, you must protect the income supporting those goals.
Term life insurance with living benefits may provide two important layers of protection:
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A death benefit for the people who depend on you if you pass away.
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Potential access to a portion of the benefit if you experience a qualifying illness while the policy is in force.
This does more than protect a life.
It helps protect the income-producing engine supporting the entire financial plan.
Living Benefits for Business Owners
A serious illness can also create major consequences for a business.
The company may depend heavily on the owner’s leadership, revenue production, knowledge, client relationships, or personal guarantees.
If the owner or a key employee becomes seriously ill, revenue may decline while business expenses continue.
Living benefits may provide valuable liquidity, depending on the ownership of the policy, the rider, and applicable tax rules.
However, they should not automatically replace:
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Disability income coverage
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Business-overhead expense insurance
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Key-person life insurance
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Buy-sell planning
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Business-continuation planning
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Emergency reserves
Business-owned insurance should be coordinated with appropriate legal, tax, and succession-planning documents.
Questions to Ask Before Purchasing Coverage
Before selecting a policy, ask:
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Which living benefit riders are included?
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What illnesses and medical events qualify?
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How does the policy define each condition?
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Is there a separate rider premium?
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What percentage of the death benefit may be accessed?
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How is the benefit amount calculated?
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Are actuarial discounts or fees applied?
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How will a claim affect the remaining death benefit?
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Is the benefit paid as a lump sum or over time?
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Does the chronic illness rider require a permanent condition?
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Will the riders continue if the policy is converted?
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What happens when the term period ends?
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What medical documentation is required?
The value of a life insurance policy is not determined only by the amount of coverage.
It is also determined by what the contract promises, when those promises apply, and how well the policy fits into the rest of your financial plan.
The Fortis Perspective
Life insurance will always be an important way to protect the people you leave behind.
But a modern protection strategy should also consider the financial consequences of surviving a serious illness.
Without adequate liquidity, retirement assets may become emergency funds. Investments may be sold prematurely. Debt may increase. Long-term strategies may be interrupted.
Living benefits may create another line of financial defense.
They may provide access to funds during a qualifying illness so the rest of your financial plan has a better opportunity to remain intact.
That is why protection comes first within the Fortis Legacy Diamond.
Because a financial plan is only as strong as its ability to withstand the unexpected.
Schedule Your Income Protection Review
Your ability to earn an income may be one of the most valuable financial assets you will ever own.
During a confidential Income Protection Review, Fortis Insurance Solutions can help you:
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Evaluate your current life insurance coverage
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Determine whether existing policies include living benefits
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Identify potential protection gaps
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Compare terminal, chronic, and critical illness provisions
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Evaluate an appropriate coverage amount and term
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Coordinate protection with retirement, debt, business, and legacy goals
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Integrate the Protect pillar with your Fortis Legacy Diamond
Do not wait until a serious illness occurs to discover what your policy does—or does not—cover.
Protect your income. Protect your family. Protect the plan everything else depends on.
Protect More Than Your Family — Protect Your Income
Living benefits can help provide access to policy benefits while you’re still living if you experience a qualifying critical, chronic, or terminal illness.
Let’s review whether your current protection strategy is designed to help protect your income, your family, and your financial plan when life takes an unexpected turn.
Schedule Your Protection Strategy Session Today
Fortis Insurance Solutions
One Plan. Four Pillars.
Protect. Retire. Bank. Leverage.
Helping Families and Professionals Build Financial Systems That Endure.