Life insurance is traditionally understood as helping people plan and prepare for the end of their lives. Many policyholders aim to use the amount of their plan to help beneficiaries pay for things like funeral costs, to settle final arrangements or to help reduce debt once they have passed. However, after the lifelong investment that many sink into a plan, they should be able to use the value whenever they need it and, that’s where a death benefit rider may come in.
How Does a Death Benefit Rider Work?
A rider functions like an add-on to an insurance plan, allowing the policyholder to opt for certain protections that are customized to his or her particular situation. There are different forms a death benefit rider can take, but many center on giving the individual access to the cash value of his or her insurance plan while he or she is still alive. For instance, an accelerated death benefit generally enables policyholders who have been diagnosed with a terminal illness to draw cash advances against the value of the death benefit. Another option is the enhanced death benefit, which pays out the highest investment gain the policy attained, even if the market value is less. Those with a variable annuity death benefit may be able to attach riders to enable cash advances and a payout that is higher than the minimum.
Pros and Cons of Death Benefit Riders
Death benefit riders can help policyholders customize a plan that makes sense for them; however, there are some factors to consider. Riders do increase the cost of a plan, which could be a serious consideration for some individuals. Plans that enable policyholders to draw on the value while they’re still alive also come with some drawbacks, such as stringent requirements for proving a terminal illness.
Life Credit takes a different approach to helping people borrow from their life insurance policy. Life Credit’s Living Benefit Loan program dispenses up to 50 percent of a person’s death benefit if he or she holds at least $75,000 of life insurance coverage. The program allows those facing cancer or another serious medical condition to access their own investment without having to have a terminal prognosis. Getting on firm financial footing is the first step to improving mental and physical wellness—and ultimately can lead to a longer and healthier life.