Living Benefits


One way to fund long-term services and supports (LTSS) is to adapt or combine coverage with existing life insurance coverage. Younger adults are much more likely to purchase life insurance than long-term care insurance. Some life insurance policies allow policyholders to convert some or all of the death benefit to a living benefit through either an accelerated death benefit or a viatical settlement agreement. Such living benefits can be used to pay for LTSS. 

Accelerated death benefits allow policyholders to access benefits before death for a terminal illness, a catastrophic illness or accident, or a need for LTSS. These benefits may be a feature of an existing life insurance policy or sold separately as a rider. Payouts are typically a percentage of the policy’s face value, up to 80 percent. These benefits may not be available for people with preexisting conditions, and payouts of accelerated benefits will reduce the amount available to beneficiaries when the policyholder dies. 

People who are terminally ill or who no longer wish to keep a life insurance policy may have the option to sell their policy to a life settlement or viatical settlement company for an immediate payout. The market for such settlements has recently expanded to include terminally ill people with longer life expectancies and even healthy older adults. People with longer life expectancies typically receive a smaller percentage of the face value of the policy (see also Investment and Securities Industry). 



Consumer protections

States should regulate accelerated death, life settlement, and viatical settlement benefits to ensure that consumers receive full disclosure of information about the advantages and disadvantages of these options. They should also ensure that consumers receive fair actuarial compensation for the value of their life insurance.