As an insurance agent, you’ve probably heard clients express confidence that their health insurance will protect them from financial ruin in the event of a serious illness. Unfortunately, this belief is often misplaced. While health insurance is vital, it frequently leaves substantial gaps that can blindside individuals and families. This is where life insurance with living benefits can play a crucial role.
Living benefits riders allow policyholders to access a portion of their death benefit early to cover costs associated with terminal, chronic, and critical illnesses. By educating your clients on these options, you can not only help them better prepare for life’s uncertainties but also grow your book of business.
According to the Kaiser Family Foundation (KFF), the average annual out-of-pocket healthcare spending for a single individual with employer-sponsored insurance was $1,315 in 2021. However, this number skyrockets when a major illness strikes. Here’s a breakdown of common costs that health insurance may not fully cover:
Deductibles and Co-Pays: High-deductible health plans (HDHPs) have become more common, with the average deductible for single coverage reaching $1,669 in 2022.
Non-Covered Treatments: Experimental therapies or treatments outside of insurance networks can cost tens of thousands of dollars.
Lost Income: A serious illness often means missed work, and the U.S. Census Bureau reports that nearly 25% of Americans lack sufficient savings to cover even one month of expenses without income.
Travel and Lodging: Specialized care may require traveling to another city or state, leading to unanticipated costs for transportation and accommodations.
Home Modifications: Chronic conditions or critical illnesses may necessitate home adjustments, such as installing ramps or stairlifts, which can cost thousands.
Living benefits riders empower clients to face these financial challenges head-on. Here are the primary types of living benefits to highlight:
Terminal Illness Rider: Policyholders diagnosed with a terminal illness and given a life expectancy of 12-24 months can access a portion of their death benefit to manage costs.
Chronic Illness Rider: For those unable to perform two or more activities of daily living (ADLs), this rider provides early access to funds for ongoing care.
Critical Illness Rider: Covers significant medical events like heart attacks, strokes, or cancer, which often bring hefty out-of-pocket expenses.
Explaining these benefits in tangible terms can make a powerful impact. For example, you might share a hypothetical scenario:
Maria, a 45-year-old teacher, had a stroke. Although her health insurance covered much of her medical care, she faced $30,000 in uncovered expenses for physical therapy and in-home care. Fortunately, her life insurance policy included a critical illness rider, which provided $50,000 from her death benefit. This money not only paid her medical bills but also helped cover her mortgage while she recovered.
Clients don’t always see the need for living benefits, so it’s essential to frame the conversation effectively:
Ask Open-Ended Questions: “Have you thought about how you’d manage expenses if you were unable to work due to a serious illness?”
Share Statistics: Highlight data, such as the fact that medical debt is a leading cause of bankruptcy in the U.S.
Use Real-Life Examples: Stories resonate more than statistics alone.
By offering life insurance with living benefits, you’re providing your clients with a financial safety net that health insurance alone cannot offer. You’re also positioning yourself as a trusted advisor who anticipates their needs and delivers solutions that truly matter.
Living benefits are not just an add-on; they’re a game-changer. Start introducing these options to your clients today and watch your practice thrive as you help them safeguard their financial future.