Chronic Illness Insurance

Did you know that you could use your life insurance to meet chronic illness and other expenses? Changes in federal tax laws have made the prepayment of death benefits under a life insurance policy possible. Most new life insurance policies have a feature or rider, which provides access to a part of the death benefit, which can then be used as living benefits.

Chronic illness means inability to perform at least two activities of daily living (eating, bathing, continence, dressing, using the toilet, or transferring) or severe cognitive impairment that requires substantial supervision from another person to protect from threats to health and safety. A life insurance policy with one of these newly developed riders or a long term care rider can provide policyholders with benefit payments to help cover their care. With long term care riders and others that offer additional benefits, an insured suffering from a permanent chronic illness can gain access to his or her cash value plus a portion of the “net amount at risk” (difference between the death benefit and cash value).

The portion of the net amount at risk that can be advanced depends on the policy and the insured’s age at onset of the chronic illness. Generally an individual would need to wait for sometime before benefits can be obtained. However some states have laws that prohibit such waiting periods.  The insured can use the benefits in any way they want, regardless of actual expenses incurred for treating the chronic illness.

Such policies may not work if you have limited financial means or if you are on Medicaid. Such policies build value making them an asset that could prevent clients from Medicaid eligibility.

Accelerated Death Benefit

If you should become seriously ill you may accumulate some very large medical expenses. Some life insurance companies have made it possible to collect an accelerated death benefit during your lifetime if such a condition should arise. What these companies are doing is allowing the insured to collect part of their death benefits before they die.

Some insurance companies offer the benefit as part of a policy, with the additional charge built into the death benefit cost. Others make the benefit a rider, also for an additional charge.

Accelerated payments made to the beneficiary can be made in monthly installments or in a lump sum, depending on the company.  Upon the death of the recipient, or policy owner, the balance due goes to the beneficiary.