New Uses Of Assets - A Living Benefit From Your Life Insurance Policy

A "Living Benefit," also known as an "Accelerated Death Benefit," is a provision in a life insurance policy under which the insurance company agrees to pay part of the death benefit to an insured who has a shortened life expectancy while the insured is still living.

The difference between the amount advanced and the death benefit will generally be paid to the named beneficiary after the insured's death.

For example, let's say Glenn has a $100,000 life insurance policy, and a 6 month life expectancy. Glenn's insurance policy includes a living benefit that pays Glenn up to 75% of the death benefit if he has a life expectancy of 24 months or less. That means he can receive up to $75,000 while he is still alive. The difference between the amount advanced and the death benefit, or $25,000, will be paid to Glenn's beneficiary when he dies.

Living benefits are fairly new features on life insurance policies. Living benefits date from the 1990s as the insurance industry response to sales of life insurance policies (Viatical Settlements.) The theory the insurance companies have adopted is that they will have to pay the death benefit soon in any event, so there is little risk if the money is paid ahead of time. Of course, just because the insurance company agrees to pay a living benefit, it does not predict what will actually happen to the individual.

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