Living Benefits

Background

One way to fund long-term services and supportsLTSS encompasses a broad range of assistance with activities of daily living and health-related tasks for people with functional limitations caused by physical or mental impairments. LTSS may be delivered in institutions or in a person’s home or a residential care setting. ( LTSSLTSS encompasses a broad range of assistance with activities of daily living and health-related tasks for people with functional limitations caused by physical or mental impairments. LTSS may be delivered in institutions or in a person’s home or a residential care setting. ) 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 benefitA provision under which an insurance company pays a reduced life insurance benefit to the policyholder while still alive instead of paying the full amount at death. or a viatical settlement agreementAn arrangement in which individuals who are terminally or chronically ill sell their life insurance policy at a less than its face value. The buyer becomes the beneficiary and receives the full amount of the policy when the original owner dies. . Such living benefits can be used to pay for LTSSLTSS encompasses a broad range of assistance with activities of daily living and health-related tasks for people with functional limitations caused by physical or mental impairments. LTSS may be delivered in institutions or in a person’s home or a residential care setting. .

Accelerated death benefitsA provision under which an insurance company pays a reduced life insurance benefit to the policyholder while still alive instead of paying the full amount at death. allow policyholders to access benefits before death in the case of a terminal illness, a catastrophic illness or accident, or a need for LTSSLTSS encompasses a broad range of assistance with activities of daily living and health-related tasks for people with functional limitations caused by physical or mental impairments. LTSS may be delivered in institutions or in a person’s home or a residential care setting. . 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).

LIVING BENEFITS: Policy

LIVING BENEFITS: Policy

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.