What Are Those Extra Benefits


When shopping for Final Expense coverage, there is much more to consider than just coverage amount and price. Many companies offer benefits that may make sense to pay a few extra dollars for your coverage. Many of these additional benefits are not understood or never covered and beneficiaries oftentimes do not utilize them to their maximum benefit. This article details some of the most popular additional benefits and how they can help you in the long term.

Accelerated Living Benefits

An accelerated living benefit is a mechanic by which a life insurance policy may pay out all or some of the death benefit while the insured is still alive. This is oftentimes confused with a loan against the cash value, however, it is completely different. In order for an accelerated death benefit to be activated, a triggering event must occur. Typically these come in two varieties — confined care such as a long-term care facility, or a terminal illness which is typically defined as a physician certifying that you are likely to die in the next two years.

It is important to note, that these features do not automatically trigger. It is up to the policy owner to decide if they would like to enact the accelerated benefit. This should be carefully considered as it can trigger a devasting effect on an individual who is receiving Medicaid since it will likely push their assets over the qualifying threshold. Even in the absence of state aid, exercising this benefit can take an otherwise tax-free event and make it taxable. It would be wise to consult your tax advisor as well as your agent.

For confined care, benefits are typically paid as a percentage of the death benefit. For instance, if you had a $100,000 policy and the rider allowed 5% per month, then your policy would liquidate at a rate of $5,000 per month for 20 months. This is often a free rider with some policies and can be a lifesaver when it is needed most.

For the terminal illness rider, it is typically represented by a percentage of the death benefit as a lump sum. Some companies will advance as much as 100% to you. This is done so that you can preplan a funeral and settle medical debts quickly. Life insurance is paid outside of probate court, but having immediate cash is oftentimes favorable for families when a loved one passes.

Cash Value

While not technically an additional benefit, many types of life insurance carry a cash value that can be used to help when you are in a pinch. Here is a case study from one of my clients. He had a $10,000 policy and wanted to increase their coverage to $20,000 to cover lost income in case he passed. This is a typical scenario when retired couples realize they are loosing income. He also had a $450 car payment on a car that he owed $3500 on still. He simply couldn’t spend the money needed to increase his benefit. We were able to utilize the cash value from the $10,000 policy to pay off the car. We surrendered the policy, which instantly cleared the loan and qualified for a $20,000 policy. The net result for him was a $375 savings each month, a paid-off car, and double the benefit of his life insurance.

Mutual Benefits

Many companies will offer you mutual benefits that go with your policy. These can range from cash back through a participating whole life policy to other perks that are granted to members of a fraternal organization. Some of the perks are very valuable. For instance, there are several companies that provide legal aid that can assist you in obtaining a will at no cost. Others offer discounted dental, vision, and hearing services. Another excellent benefit is access to college scholarships for children and grandchildren. Many of my clients simply enjoy the mission of some of the fraternal organizations.

The best source of the information regarding your policy is your agent. There are too many additional benefits to be covered in an article, but I would encourage you to read your policy and communicate with your agent. They will be able to fully explain any of the perks and benefits that come along with your policy.