Here's something most people don't realize about life insurance: you might be able to use it before you die. It sounds counterintuitive—after all, isn't life insurance supposed to protect your family after you're gone? But living benefits (also called accelerated death benefits) let you tap into your policy's death benefit while you're still alive if you face certain serious health challenges.
More than 3 million Americans now have life insurance policies with living benefits, and over 150 insurance companies offer some version of these riders. The best part? Many carriers include them automatically at no extra cost. If you're facing a terminal illness, battling cancer, or dealing with a chronic condition that requires ongoing care, these benefits can provide crucial financial support exactly when you need it.
What Are Living Benefits and How Do They Work?
Living benefits allow you to receive an advance payment from your life insurance death benefit when you're diagnosed with a qualifying medical condition. Think of it as accessing your own money early when you need it most. The amount you can receive varies significantly by carrier and policy type—anywhere from 25% to 100% of your death benefit—with lifetime maximums ranging from $1 million to $3 million depending on the insurer.
Here's what makes living benefits so valuable: the money isn't restricted to medical expenses. You can use it however you choose—to pay medical bills, cover your mortgage, replace lost income, or even take that trip you've always dreamed of. The funds are yours to use as you see fit during a difficult time.
There is one important tradeoff: any amount you receive through living benefits will be deducted from what your beneficiaries eventually receive. If you have a $500,000 policy and take $200,000 in living benefits, your family will receive $300,000 after you pass away. This means you'll need to balance your current needs against your family's future security.
Types of Living Benefits: Terminal, Critical, and Chronic Illness Riders
Not all living benefits work the same way. Understanding the different types helps you know what's available and when you might qualify.
Terminal illness riders are the most common. If a doctor certifies that you have 12 months or less to live (some policies specify 6 to 24 months), you can typically access up to 80% of your death benefit. Most insurers include this rider automatically, and it's often available at no additional cost.
Critical illness riders cover specific major health events like heart attacks, strokes, organ transplants, or cancer diagnoses. When you're diagnosed with one of these covered conditions, you receive a lump sum payment—usually a percentage of your death benefit. These riders focus on high-cost medical events that dramatically impact your life but don't necessarily mean you're terminally ill.
Chronic illness riders activate when you can't perform at least two activities of daily living—things like bathing, dressing, eating, or walking—without assistance. This is particularly relevant for conditions like advanced Alzheimer's, severe arthritis, or mobility-limiting injuries. Some carriers like Nationwide limit chronic illness benefits to 20% of your specified amount or a daily maximum (around $420 per day in 2025), while others like Mutual of Omaha allow you to access up to 80% of your death benefit up to $1 million.
What You Need to Know Before Activating Living Benefits
Before you request living benefits, there are several practical considerations to understand. First, timing matters. Many policies require a waiting period before you can access these benefits—the policy must be in force for a specified time, often 12 months or more. You also can't add these riders after you're already sick; they must be in place before you develop a qualifying condition.
Documentation is crucial. You'll need medical verification from your doctor to activate your benefits. For terminal illness claims, a physician must certify your prognosis. For critical illness, you'll need diagnosis records. For chronic illness, you'll typically need documentation proving you can't perform two or more activities of daily living. Some insurers charge a small administrative fee (around $250) when benefits are paid, though many don't charge anything beyond that.
Tax implications can be complex. Terminal illness benefits are generally tax-free, but chronic illness benefits may be considered taxable income depending on how much you receive. Accelerated benefits can also affect your eligibility for Medicaid, which is important if you're planning to rely on government assistance for long-term care. It's worth consulting with a tax professional before taking a large distribution.
Living Benefits vs. Long-Term Care Insurance: What's the Difference?
A common question is whether living benefits can replace long-term care insurance. The short answer: not really. While there's overlap, they serve different purposes.
Living benefits draw from your death benefit, meaning every dollar you use for your care is a dollar your beneficiaries won't receive. Long-term care insurance, on the other hand, is dedicated coverage that doesn't reduce what your family inherits. Long-term care policies are specifically designed to cover extended nursing care, rehabilitation, and in-home assistance, often with higher benefit limits and longer coverage periods.
That said, living benefits can be a valuable supplement, especially if long-term care insurance is too expensive or you can't qualify due to pre-existing health conditions. Many people use a combination approach: maintaining dedicated long-term care coverage while having living benefits as a backup option. The key is understanding what your life insurance policy covers and recognizing its limitations—the face value of your policy may not be enough to cover years of long-term care services.
How to Get Started with Living Benefits
If you don't currently have life insurance, look for policies that include living benefit riders automatically. Both term life and permanent life insurance can offer these riders, though permanent policies also build cash value you can borrow against—another form of living benefit. When comparing policies, ask specifically about terminal, critical, and chronic illness riders, what percentage of the death benefit you can access, and whether there are waiting periods or health requirements.
If you already have life insurance, review your policy documents or contact your insurer to see what riders you have. Many people are surprised to discover they already have accelerated death benefit options they didn't know about. If your current policy doesn't include these riders, ask about adding them. Depending on your age and health, you may be able to add riders to an existing policy, though some require additional underwriting.
The peace of mind that comes with living benefits is significant. You're not just protecting your family's future—you're also protecting yourself. Whether you're facing a serious diagnosis or simply want the security of knowing options are available, living benefits transform life insurance from a death-only benefit into a comprehensive safety net that can support you throughout your life.
