The Need for Living Benefits

By Steve Shorrock, ChFC, CLTC, FLMI

All life insurance companies and life insurance products have one thing in common: they pay the beneficiaries at the death of the insured. As long as premiums are current and the policy has not lapsed, death benefits are paid. This has been the hallmark for insurance companies since their creation over 300 years ago.

But times are changing as insureds’ life expectancies continue to lengthen. As their lives change, so do their insurance protection needs. The number of individuals who live to their 100^th birthday has grown exponentially. A healthy 80-year-old female now has an average life expectancy of 12.5 years.

Consider the following:

• By 2020, about 157 million Americans will be afflicted by chronic illnesses
• 60% of all Americans who reach age 65 may need long-term care at some point in their remaining lives
• Every 26 seconds, someone suffers a coronary event. Every 40 seconds, someone suffers a stroke.

As a result of people living longer, many insureds tend to value “living” benefits as important as the death benefit. While the death benefit provides a family or business proceeds at the death of the insured, living benefits provide proceeds to the insured for needs while they are alive and often when they need it most.

This change in the value proposition of life insurance is easily understood. The need for living benefits is a result of many factors including:

• Aging population
• Concern of out-living assets
• Becoming a burden on children, relatives or friends
• Public sector programs are inadequate
• How do I pay for my uninsured medical costs?

All of which explains why individuals are looking for a strategy that both provides for early death but also to help protect them financially against a potential chronic illness. Newly developed life products, such as the recently approved “Benefits for Living” concept, offer both life protection and the ability to accelerate the death benefit at the time of a chronic illness.

Advisors should seek out life insurance products that cover the total lifetime of insureds because insurance protection needs change over time. The need for living benefits is now and must be included in all clients’ planning.

Steve Shorrock is President of LifeVentures Corp, which designs new life insurance products and develops marketing concepts for agents, and Director of Veris Settlement Partners, a life settlement firm that brokers seniors’ unwanted or unneeded life insurance policies. PleYou can reach Steve at his Northport, Long Island office at 631-239-6655 or steve@lifeventurescorp.com