Sometimes life insurance seems like a losing proposition. You pay and pay premiums and can’t envision the time when you will need it or even worse, when your family gets the money upon your death. While traditional products were designed for death benefits protection, today’s products are much more flexible, allowing people to use them for cash value accumulation, disability protection, long term care protection, and should none of those needs become a reality…death benefit protection.
The term we insurance people use to describe these flexible uses of a life insurance policy is “living benefits” – meaning values created by a life insurance policy can be used during the insured’s life, not just upon their death.. These living benefits become more and more lucrative the earlier you start.
Starting early in a child’s life can allow you to provide benefits to them throughout their life. This can be through cash distributions for college funding or acceleration of death benefit for disability and long term care needs.. We’ve been structuring policies that grow to as much as $1 million of available benefit when the child reaches their 80s (i.e. when they’re most likely to need that coverage for long term care needs) for as little as $25 a month. We don’t start at a million because that would be silly, but we design the policy so it’s gets there when the time is right.
These hybrid products can allow you to use one contract for multiple needs. Cash accumulated inside the policy can be withdrawn on a tax free basis, provided the actual policy stays in force. Much more flexible than a 529 plan, these withdrawals can be used for college funding, starting a business, a home purchase and basically anything the child may need in the future. The living benefit riders allow the insured to draw down on the coverage amount for disability or long term care funding. It’s important that I note here that different carriers have different protections associated with these living benefit riders, so understanding what any given carrier is offering is essential.
These policies can be taken out up to age 90, but like we said, they perform beautifully when started in the toddler years. It’s really not about protecting those years as much as it is providing the long term living benefits we’ve discussed. Many parents and grandparents will also take out like coverage for themselves in order to protect their children and grandchildren from the financial exposure of their own long term care needs later in life. If you’ve shopped for long term care coverage you know it’s a use it or lose it proposition. When you use a hybrid life insurance product with living benefits it’s not. You use the benefit during your lifetime or it passes to your beneficiaries when you’re no longer here.
If you’d like to discuss your personal situation we’d love to hear from you. And PS…these types of policies don’t pull up on our quoting system, so don’t let that scare you.