Hundreds of years ago, life insurance was first conceived. It was originally intended to replace the income of a family’s primary breadwinner (usually the husband), so that dependent family members would not be forced into poverty in the event of his death.
That was a reasonable use for life insurance back then, when life spans were shorter and more varied needs than an old-fashioned life insurance policy can accommodate.
Today, due to modern medicine, people who suffer heart attacks, strokes, and other debilitating diseases or injuries can expect to live through the event. But after surviving a serious situation, or while fighting a terminal illness, many find themselves unable to work any longer. The family experiences a significant loss of income, just as if their breadwinner actually passed away.
The combination of high medical bills and drastically reduced income create the perfect storm to force many families into bankruptcy. While caring for a very sick family member, the entire household also suffers financially.
Luckily, the life insurance industry recognized the need for a greater scope of coverage, and introduced the concept of “living benefits”. If your insurance policy pays living benefits, it means that you will receive your payout when you need it, rather than after your death. This payout can be used to cover medical bills or replace lost income for dependents.
Not all life insurance policies include a living benefits rider. You should specifically shop for such a policy, and upgrade your policy if you want to add this coverage.