How to Access Benefits Before Death for Financial Security
Life insurance isn’t just for your beneficiaries after you pass away. It can provide living benefits that help with medical expenses, long-term care, retirement income, and more. Whether you need cash now or want to maximize your policy’s value, here’s how you can use life insurance while you’re alive.
1. Access Money Through an Accelerated Death Benefit (ADB) Rider
How It Works:
An accelerated death benefit rider allows you to access a portion of your death benefit if you’re diagnosed with a terminal, chronic, or critical illness. Typically, insurers let you take between 25% and 90% of the death benefit early.
Example:
Lisa, age 62, has a $300,000 universal life policy. After a cancer diagnosis, she accessed $120,000 through her ADB rider to pay for home care and medical bills. Her beneficiaries will now receive $180,000 instead of the full amount.
- Pros: Tax-free access to funds; often included at no extra cost.
- Cons: Reduces the final payout to your beneficiaries.
- Who needs it? Anyone who wants a safety net for unexpected health issues.
- Who doesn’t? Those with comprehensive health and long-term care coverage.
2. Borrow Against Your Policy with a Cash Value Loan
How It Works:
Whole life and universal life policies build cash value over time. You can borrow against that amount, using your policy as collateral. You decide when—or if—you repay the loan.
Example:
Carlos, age 50, borrowed $25,000 from his $100,000 cash value to help his daughter with college tuition. He pays annual interest but hasn’t had to apply for a bank loan.
- Pros: No credit check; lower interest rates than traditional loans.
- Cons: Unpaid loans reduce the death benefit and could cause the policy to lapse.
- Who needs it? Those needing quick access to cash with low interest.
- Who doesn’t? Term life policyholders or those who don’t want to risk their coverage.
3. Withdraw Cash from Your Life Insurance Policy
How It Works:
Withdrawals allow you to take part of your cash value permanently. Withdrawals up to your cost basis (the premiums you paid) are tax-free.
Example:
Nancy, 58, has paid $60,000 in premiums, and her cash value has grown to $95,000. She withdraws $40,000 tax-free to buy a new car, leaving $55,000 in cash value and a slightly reduced death benefit
- Pros: No loan interest; immediate access to funds.
- Cons: Withdrawals above cost basis may be taxable; reduces the death benefit.
- Who needs it? Those needing tax-efficient access to cash.
- Who doesn’t? Policyholders rely on the full death benefit for their heirs.
4. Sell Your Life Insurance Policy (Life Settlement)
How It Works:
A life settlement lets you sell your life insurance to a third party (usually an investor) for more than the surrender value but less than the death benefit. They take over the premium payments and collect the death benefit later.
Example:
Robert, 75, sold his $500,000 universal life policy for $90,000 in cash. He no longer needed the coverage and wanted to fund his assisted living costs.
- Pros: Provides a significant cash payout.
- Cons: Beneficiaries lose the policy’s death benefit and face potential tax implications.
- Who needs it? Seniors who need liquidity and no longer require coverage.
- Who doesn’t? Those who still need life insurance protection.
5. Use Life Insurance for Long-Term Care Expenses
How It Works:
This rider lets you use part of your death benefit to pay for home care, assisted living, or nursing home expenses if you cannot perform certain daily activities.
Example:
Patricia, 70, used her LTC rider to cover $5,000 monthly for home health care after a stroke. Her $400,000 death benefit will be reduced by the amount she uses.
- Pros: Helps cover costly long-term care expenses tax-free.
- Cons: Reduces the amount left to beneficiaries; may increase premiums.
- Who needs it? Anyone concerned about paying for long-term care in the future.
- Who doesn’t? Those with separate long-term care insurance.
6. Convert a Term Life Policy to a Permanent One
How It Works:
Many term policies let you convert to a permanent policy (whole or universal life) without a new medical exam, allowing you to begin building cash value and access living benefits.
Example:
David, 42, converted his $250,000 term policy to whole life before it expired. Ten years later, his policy accumulated $30,000 in cash value, which he borrowed against to start a business.
- Pros: Extends coverage and offers living benefits.
- Cons: Higher premiums than term life insurance.
- Who needs it? Those who want lifelong coverage or cash value benefits should consider their options.
- Who doesn’t? Those who only need coverage for a specific period.
7. Use Life Insurance for Retirement Income
How It Works:
Policyholders can take systematic withdrawals or loans from their cash value during retirement to supplement income tax-efficiently.
Example:
Evelyn, 65, uses $15,000 per year from her whole life policy through policy loans to supplement her Social Security income without triggering higher taxes. She also maintains her death benefit for heirs.
- Pros: Tax-advantaged income source.
- Cons: Withdrawals reduce the death benefit.
- Who needs it? Retirees looking for additional income.
- Who doesn’t? Those with sufficient retirement savings.
Compare Life Insurance Rates from Top Providers
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Who Should Use These Strategies — and Who Shouldn’t
Best For:
- Policyholders with permanent life insurance (whole, universal, indexed).
- Those over 40 who want flexible access to cash value.
- Retirees managing healthcare and income needs.
Not Ideal For:
- Term life policyholders without riders.
- People with low cash value or those who depend solely on the full death benefit.
- Individuals are unable to manage complex policy loans or withdrawals.
Call to Action
If you’re not sure which method suits you, or want to find policies that include living benefits, contact The Annuity Expert for free quotes. Our licensed brokers help you compare life insurance options that work while you’re alive—so you can protect your health, wealth, and family with one strategy.
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Questions From Our Readers
How soon can you borrow against a life insurance policy?
If you have a whole life insurance policy, you can use it to borrow money. But there are a couple of things to remember. First, you need to have the policy for some time before it has enough value to borrow against. Second, when you borrow, it’s like taking out a loan. If you don’t pay it back, along with the interest, the amount you get when the policy pays out will be less than the borrowed amount and the interest accrued.
Does an IUL have living benefits?
An IUL policy combines universal life insurance with index-linked growth. Premiums cover costs and build cash value based on a stock market index like the S&P 500, protecting your principal from downturns. It offers flexible premiums, death benefits, tax-deferred growth, and tax-free withdrawals, making it a wise choice for enhancing your net worth.
What kind of life insurance can you use while alive?
Permanent life insurance with cash value is the most common option. Final expense insurance may also include riders that let you use benefits early. Term life usually doesn’t offer living benefits unless you add riders such as accelerated death benefits or disability waivers.