Living Benefits Rider.
Helps to ease the financial stress of a critical illness.
The obvious value of life insurance is the death benefit protection it provides, as well as the cash value accumulation potential offered by products such as whole life insurance. But these features are often just the tip of the iceberg. Since everyone has unique needs and goals, consumers no longer have to settle for one-size-fits-all insurance.
Today, many life insurance plans are customizable through the policy “riders.” A rider is an option that can be added onto a life insurance policy to provide additional protection and/or benefits. Of course, you should have a need for insurance that you've already identified before considering how a rider might strengthen your policy. Riders create flexibility by enabling policy owners to design a combination of base plans and additional options that best suit their needs. Some riders are automatically included with the insurance; others must be requested, but do not have an additional cost attached; still others can be obtained at an additional premium. Each has its own unique features and purpose.
The Living Benefits Rider.
Rider benefits can vary by state, and not all riders are available in every state. Your New York Life agent can answer any questions you have about a particular rider. The Living Benefits Rider (LBR) can help offer peace of mind at a critical time. It entitles the policy owner to an early (accelerated) payout of policy death benefits,1 if the insured is diagnosed to have a life expectancy of 12 months or less.2 The LBR can help make the insured’s remaining time as comfortable and as dignified as possible.
With the escalating costs of medical bills, too many terminally ill patients are faced with financial hardship during the worst possible time. As a person deals with the emotional and physical struggles of terminal illness—as well as the impact on loved ones—the last thing needed is the additional stress of astronomical medical bills.
Often, meeting these bills becomes yet another struggle to endure. The sad irony is that, while the patient may have substantial collateral in life insurance policies, those funds are technically “off limits.” The LBR breaks down the “off limits” fence. By invoking it, the policy owner can access up to $250,000 or more of eligible policy proceeds, depending on the type of contract. This payment—which is made to the policy owner rather than the beneficiary3—reduces the cash value and death benefit.
Policy owners in this situation can also access funds through a policy loan or a policy surrender. In most cases, however, the LBR may provide more funds than a policy loan or surrender. This is because policy loans or surrenders are usually based on cash value, while the amount available from the Living Benefits Rider is generally based on the policy’s face value, paid-up additions, and (if applicable) an amount payable under a rider that provides a level amount of insurance. The LBR may be exercised only once; the rider will terminate once a claim for accelerated benefits is made.
At the policy owner’s request, this rider can be added to new or existing policies,4 (if issued after 1985), for a one-time charge, which is applied when the rider is exercised. The policy owner merely has to elect living benefits coverage, and can choose to do so anytime. The policy owner can even elect living benefits coverage at the same time that he or she furnishes New York Life with medical proof that a terminal illness exists.
The financial consequences of a terminal illness can be catastrophic, but the LBR, its benefits, and certain restrictions and limitations may offer a strong measure of relief, and provide comfort during a difficult time. For more information about the LBR, contact a local New York Life agent by clicking on the “Talk it through with an expert” tab.
At no charge to you, a professionally trained and experienced New York Life agent can help you analyze your needs and recommend appropriate solutions through insurance and financial products and concepts.
This material is being provided for informational purposes only. Neither New York Life nor its agents provide legal, tax, or accounting advice. Please contact your own advisors for legal, tax, and accounting advice.
The rider form numbers for the Living Benefits Rider are as follows: 991-495 for Level Premium Convertible Term and Yearly Convertible Term; 206-496.27 for Family Protection Insurance and Whole Life (Accelerated Benefits Rider); ICC12213-497 for Employee’s Whole Life (Accelerated Benefits Rider); 929-495.27 for Universal Life and Variable Universal Life; and 213-495 for Whole Life, Custom Whole Life, and Custom Survivorship Whole Life (Accelerated Benefits Rider).
NOTE: Proceeds may be taxable, and the IRS has not yet clarified how adding this rider to your policy could affect the income tax treatment of the policy. For this reason, it’s important to consult with a personal tax advisor prior to making the election to receive benefits.