Eavesdrop on any conversation between people who are struggling with cancer (or any other advanced-stage illness) and you may find yourself surprised by how quickly the conversation turns to finances, and how much time and energy people spend on trying to figure out how to pay for cancer treatments and medical bills. Though most people assume that health insurance picks up the tab for chemotherapy, radiation therapy, hospitalization and other costs, the truth is that the coverage only goes so far, and the costs of copays alone can drive people into bankruptcy. One solution that many people turn to is taking out loans for cancer patients. Some decide to refinance their homes or take out personal loans from the bank, while others turn to life insurance loans that pull funds from the policies that they’ve been paying for for years, thus allowing them to use their death benefit while they are still living.
Another option that is frequently discussed is taking advantage of what is known as accelerated benefits from their life insurance policies. Accelerated benefits are also sometimes known as living benefits. They are not offered for all life insurance policies, but those that do have them allow the policy holder to request and receive the death benefit of their policy before they die. The benefit is generally only available to those that have been diagnosed with either a long term high-cost illness or a terminal illness, though it can also be offered to those that simply have a need for permanent nursing home confinement or long-term care, or those who require extraordinary and expensive treatment such as an organ transplant. Different companies have different requirements and limitations on how close to death the insured needs to be in order to qualify for the accelerated benefits, and there are also differences on exactly what percentage of the death benefit can be distributed. The range is generally between twenty-five percent of the death benefit and the full benefit amount, though taking 100 percent of the value may increase the cost of your premiums.
When accelerated benefits are taken, it obviously reduces the remaining death benefit. This means that the amount that you intended for your beneficiaries will receive upon your death will either be much lower or disappear entirely. Some insurance policies already include the accelerated benefits option within the cost of your insurance premium, while others will charge a small amount for activating the benefit. In most cases the benefit is offered in permanent individual life insurance policies that have death benefits of $25,000 or more, as well as in some term policies – you can check your policy to see whether it is currently included in your policy, as some companies allow you to add an accelerated benefits rider.
If your policy does include accelerated benefits and you are considering taking advantage of them rather than going the route of taking out cancer loans, you should check with your company to see how the benefits are paid out. In some cases payments are made monthly, while other policies will allow you to be paid in a lump sum or to choose how you would like it dispersed. The benefits are generally not considered income, and therefore are not taxable — much like a cancer loan. They also do not need to be returned if you go into remission. It is important to remember that these benefits will deplete the death benefit that you had originally planned to have benefit your spouse or other loved ones – but they may provide you with an alleviation of stress in the face of the financial hardship that illness can bring on.
When making a financial decision about taking an accelerated death benefit from your life insurance, you need to consider a cancer loan for a variety of reasons. If you take a cancer loan, you may be able to receive more than what is offered by your insurance company. You may also be able to receive funds faster and with more flexibility on your terminal illness. Each situation is unique and a free review of your life insurance policy is always available to you. Make sure you find out how much you qualify for with a life insurance loan from Fifth Season Financial to determine the best financial decision for you and your family.
If you’d like to speak with someone, call us at (866) 459-1271 and we’ll discuss your options in private.
*Note: You should always refer to your life insurance policy and consult your life insurance company when determining what your life insurance benefits are for your specific policy.
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