Death Benefits vs. Living Benefits
When you offer life insurance to clients, do you discuss living benefits? Perhaps you feel that there is little reason to advocate for living benefits. Failing to explain living benefits means that you possibly neglect an aspect of life insurance that is potentially important to your clients.
Life Insurance Benefits
Understanding and contrasting the death benefits and living benefits is important for advisors, and for clients. Clients deserve the comprehensive advice related to existing policies, or life insurance benefits that they need, that possibly help to protect their family or their business.
Most advisors have no problem making sure that clients understand death benefits of a term or whole life policy. Clients learn that the death benefit is paid to the beneficiary, or beneficiaries.
Providing unbiased information about how to choose the ideal policy, and the death benefits provided help advisors best serve the needs of their clients.
Living benefits, although likely a lesser known option, potentially offers a critical benefit. Although modern medicine made monumental strides in decreasing the death rate of cancer, and some other medical conditions in recent years, the fact is that there are still many people with cancer or other potentially terminal illnesses. New diseases are discovered that were previously unheard of in past generations.
Why Do You Need Living Benefits?
Some policyholders fail to purchase living benefits when offered, while others simply assume that they do not need the benefit because they are healthy. Your clients may not discuss the living benefit to their potential clients, particularly when clients seem healthy, or are younger clients. This is potentially a big mistake.
A living benefit is sometimes offered as a standard part of a universal life or term policy. Others offer living benefits as a rider. There are differences, which advisors and their clients need to understand. No matter how it is offered, you are potentially doing your clients a disservice by not discussing it with them, and advocating for the benefit.
So, what exactly is a living benefit? How do you best explain it to clients who do not want to hear industry-related jargon that they may tune out because they have no idea what it means? Keep it simple, and start by explaining that a living benefit pays cash to the policy holder while that individual is still alive, but possibly facing a terminal or serious illness. Some insurers provide the benefit if the client is not terminally ill, but is critically or chronically ill. This is a living benefits rider.
Living benefits that are not offered as a rider and are part of a standard policy often feature a cash value benefit to the client or policyholder while alive. Make sure that your clients understand all details of living benefits, the features, and how it possibly helps the client.
Comparing Death Benefits vs Living Benefits
It is important that the client understand that policyholders do not receive the death benefits. They utilize the living benefit of cashing in the policy for part or all of its cash value. Clients need to understand that this is the cash value, and not always the face value of the policy.
Living benefits provide much-needed cash for the terminally ill or critically ill client. The policy proceeds help to pay for expenses not covered by health insurance.
The client or policyholder uses the money however they need to use it if it is not needed for extraordinary medical expenses. Paying child care, mortgage or rent payments, or other necessary expenses are some examples.
It is up to the advisor to make sure that their clients understand the necessity of comparing and contrasting death benefits vs living benefits of life insurance.
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