By Brian M. Johnson, CLTC, MBA
Do you own a life insurance policy? Do you own the old life insurance or the new life insurance? Don’t know the difference? Let me help.
Traditionally, life insurance, whether it’s term or whole life, benefits only the beneficiaries of the policy, meaning you probably met your maker. No one wants to think about it, but we buy life insurance to protect our families, our businesses or to leave a legacy. However, other risks are far more likely to happen than an untimely death.
What if we live too long? What happens if we develop a sickness or become disabled? What if my needs simply change?
Consumers and advisors need to know about the new life insurance policies that allow you to use the death benefit while you’re alive. If the insured person is diagnosed with cancer, suffers a heart attack, stroke, etc., the critical illness rider on a new life insurance policy allows the insured to accelerate a portion of the death benefit to use for medical expenses or to offset lost income.
If the insured requires long-term care, whether at home or in a facility, the chronic illness rider allows the insured to use 100 percent of the death benefit to pay for the services he/she needs.
If the insured’s needs change over or time or he/she determines that the coverage is no longer needed, the return of premium rider allows the insured to take a portion or 100 percent of the premiums paid as a refund.
If you currently own a whole, universal or variable life insurance policy, the accumulated cash values in that policy may be exchanged (using section 1035 of the tax-code) tax-free to fund a new policy with these valuable, new riders that provide living benefits. These riders are available on both term and whole life insurance policies, meaning this additional layer of protection won’t necessarily increase your premium.
Moreover, many of our highly-rated insurance companies now include these living benefits on the policy at no additional cost. These unique policy features should serve as a reminder to review your insurance portfolio on a regular and consistent basis. Premiums change, your needs change and policies change. Always make sure your insurance coverage evolves along with you.
Insurance in general is about managing and mitigating risk. We realize that no one loves paying an insurance premium, but if you’re going to purchase a life insurance policy, why wouldn’t you own a policy that could mitigate more risk?
Today’s life insurance policies, with these living benefits, are powerful financial instruments that should be used as a foundation for any family or business.
Johnson is director of business development at New York Long-Term Care Brokers Ltd.