Life Insurance - More Than Just Death Benefits

The many uses of life insurance today extend far beyond the original concept of a death benefit. Certainly death benefits continue to play a major role in life insurance sales presentations and purchase decisions, and that will always be true.

It is worth pointing out that many transactions that may add to family finances and security may be backed up by life insurance. When a person borrows money for a real estate purchase, an investment opportunity or starting a small business, the funds may not be available unless life insurance on the life of the borrower is purchased to protect the interests of the lender. Use of life insurance in this manner may in the long run help an individual to build personal assets and advance family security.

In addition to death benefits, many life insurance policies include other features, such as savings or investments. This makes it possible to use life insurance as a vehicle for building capital for accumulating assets or funds designed to serve specific purposes. Thus, some people use life insurance to accumulate funds for children’s education, to provide retirement income, to create or add to an estate and for other purposes.

Many people question whether life insurance is the best method of getting access to capital. But there’s not much question that it’s one of the safest and most conservative methods.

In addition to death benefits, many life insurance contracts include other types of insurance benefits. These non-life insurance benefits may be included in a policy or may be attached as optional riders.

One of the most commonly found types of additional benefit is known as waiver of premium. This is actually a disability insurance benefit, which pays the life insurance premiums while an insured person is disabled.

Another type of disability benefit that is commonly attached to life insurance policies is a disability income benefit. This usually is provided as ”waiver of premium with disability income benefit,” but it may be attached as a separate benefit. A disability income benefit pays a monthly income to an insured person who is totally disabled.

Dismemberment benefits may be attached to a life insurance policy, most frequently in the form of accidental death benefit and dismemberment benefits.

As we’ve seen, the accidental death benefit pays an additional death benefit if an insured person dies because of an accident. The dismemberment benefit pays specified sums if the Insured loses one or more limbs, or sight of one or both eyes, and in some cases hearing, as the result of an accidental injury. Since the insured person is still alive and this is not a accidental death benefit. It is not technically a form of life insurance.

In recent years, the concepts of living or accelerated benefits and long-term care needs have begun to take hold in the life insurance field. They are increasingly showing up as benefits attached to life insurance contracts.

In the case of living benefits, a portion of the proceeds that would otherwise be payable as a death benefit is advanced to an insured who has a terminal disease and a need for special medical care. It is widely acknowledged that this is a humane application of life insurance proceeds, because the funds are often used to ease pain, suffering and discomfort during the final period of life.

These benefits are usually provided without charge because the payment of a death claim is imminent.

Long-term care benefits pay for nursing care, home health care, or custodial care (assistance with the tasks of daily living, such as eating, bathing, dressing, etc.) which may be needed following a period of hospitalization. This is actually a health insurance benefit which is often sold separately as part of a health insurance policy. However, it is often available as a rider to a life insurance policy.

When said as a separate benefit, an additional premium is charged and the benefit will not affect the policy’s face value of cash value. When sold as part of an Integrated plan, an additional premium is not charged for long-term care benefits which are simply borrowed from the life Insurance benefits and accordingly reduce the remaining face value and cash value.