Term Life Insurance With Living Benefits

Shawn Plummer

CEO, The Annuity Expert

As we navigate life’s many twists and turns, ensuring our loved ones are shielded from financial strain in the face of adversity is prudent. This is where term life insurance with living benefits comes into the picture. But what exactly does it entail? Does term life insurance come with living benefits? This guide aims to answer these questions and provide insights into this critical financial safeguard.

Understanding Term Life Insurance with Living Benefits

In a nutshell, term life insurance with living benefits offers policyholders financial protection for 10, 20, or 30 years. Unlike standard term life insurance, this type of policy includes additional benefits that can be accessed while the policyholder is still alive, hence the term “living benefits.” Notably, these living benefits may have potential tax implications, so it’s advisable to consult with the IRS or a tax professional to ensure you understand any possible obligations and can plan accordingly.

In the event of a critical, chronic, or terminal illness, this type of insurance allows you to access a portion of your death benefit ahead of time. This can be instrumental in catering to medical expenses, home modifications for accessibility, or any financial strain brought on by the illness.

Example: Consider Sarah, a 40-year-old policyholder with term life insurance with living benefits. Suppose she’s diagnosed with a critical illness. In that case, she can access a portion of her death benefit to help cover her treatment costs, easing her financial stress during an already challenging time.

Term Life Insurance With Living Benefits

Types of Life Insurance with Living Benefits

Although term life insurance can include living benefits, it’s important to note that it’s not the only type with these perks. Permanent life insurance policies like whole life or universal life insurance often come with living benefits. They’re typically more expensive but offer lifetime coverage and a cash value component, making them a more comprehensive option.

What Does Term Life Insurance with Benefits Entail?

Term life insurance with benefits essentially marries the simplicity and affordability of term life insurance with the added protection of living benefits. This type of insurance generally provides coverage for the following:

  • Critical Illness: Conditions like heart attack, stroke, or cancer.
  • Chronic Illness: Inability to perform two of the six daily living activities.
  • Terminal Illness: Diagnosis of a limited expected lifespan, usually 12 to 24 months.

Cost of Term Life Insurance with Living Benefits

Like any insurance policy, the cost of life insurance with living benefits varies depending on age, health status, coverage amount, and the term length chosen. However, as a rule of thumb, adding living benefits to a term life insurance policy typically increases the premium.

Example: Assume Jack, a non-smoker and in excellent health, opts for a 20-year term life policy worth $500,000. His premium might be around $30 per month. Adding living benefits to his policy might increase his monthly premium to around $40.

Weighing the Pros and Cons of Living Benefits Life Insurance

Every coin has two sides, and the same applies to term life insurance with living benefits.


  • Provides additional financial security in case of severe illness.
  • Enables policyholders to access benefits during their lifetime.
  • It offers a safety net to help cover unexpected medical costs.


  • Higher premium than a standard term life insurance policy.
  • Living benefit payouts may reduce the death benefit for beneficiaries.

Next Steps

Term life insurance with living benefits is a robust protective measure, providing financial security not just after your passing but also in instances of severe illness. It gives you the peace of mind that comes from knowing you have a safety net to help mitigate the financial burden of medical costs. However, like any financial product, weighing the benefits against the costs and evaluating whether this type of insurance aligns with your circumstances and financial goals is essential.

Term Life Insurance Living Benefits

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Frequently Asked Questions

What happens to term life insurance if you don’t use it?

When term life insurance expires, the policyholder doesn’t have to take any action. Instead, the insurance carrier notices that the policy is no longer in effect, the premiums stop, and there is no death benefit.

What happens if you live longer than your term life insurance?

By of your term, if you are still alive (we hope that is the case), two possible outcomes are likely: Either your coverage will end. You won’t be insured anymore, or your insurer might give you the option to convert some or all of your policy into permanent life insurance.

What is the main disadvantage of term life insurance?

Although term life insurance is usually the most affordable option, there are some drawbacks to consider before purchasing a policy. This type of insurance does not accumulate cash and offers no surrender value if you cancel. If you need to renew your policy, the premium will be recalculated based on your current age and health status, which may result in a substantial rate increase.

Does term life insurance have a cash value?

Term life insurance is usually more affordable than permanent whole life insurance. However, it is essential to note that term policies do not offer any cash value, do not provide any payout beyond the term duration, or have no value aside from the death benefit.

Is there any risk in term insurance?

Certain companies offer coverage for both partial and permanent disability of the insured. However, it is essential to note that pure risk plans only include term insurance.

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Shawn Plummer

CEO, The Annuity Expert

I’m a licensed financial professional focusing on annuities and insurance for more than a decade. My former role was training financial advisors, including for a Fortune Global 500 insurance company. I’ve been featured in Time Magazine, Yahoo! Finance, MSN, SmartAsset, Entrepreneur, Bloomberg, The Simple Dollar, U.S. News and World Report, and Women’s Health Magazine.

The Annuity Expert is an online insurance agency servicing consumers across the United States. My goal is to help you take the guesswork out of retirement planning or find the best insurance coverage at the cheapest rates for you. 

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