Life insurance that pays you while you're still alive. Here's how it works - and why it changes everything.
Most people think life insurance only pays out when you die. That used to be true - but modern policies can include living benefits that let you access your death benefit generally income-tax-free while you're still alive, if diagnosed with a qualifying illness. This is, in my opinion, the single most important innovation in life insurance in the last 30 years.
At DG Life Group, living benefits are our specialty. Here's what they are, how they work, and why every family should know about them.
Access your death benefit if diagnosed with a terminal illness (typically life expectancy of 12–24 months or less).
Example: Stage 4 cancer diagnosis. Access up to 100% of your death benefit to cover treatment, family time, or final wishes.
Access funds if you can no longer perform 2 of 6 activities of daily living (ADLs) or suffer severe cognitive impairment.
Example: Alzheimer's, severe stroke, or ALS. Monthly payouts to fund long-term care at home or in a facility.
Lump sum payout upon diagnosis of a covered critical illness - even if you're expected to recover.
Example: Heart attack, stroke, invasive cancer, organ transplant. Use funds for treatment, lost wages, or recovery.
of Americans turning 65 will need some form of long-term care
average annual cost of a private nursing home room in 2025
of long-term care recipients are adults aged 18–64 (not just seniors)
what Medicare pays for custodial long-term care
Sarah purchased a $500,000 permanent life insurance policy with living benefits at age 42. Her monthly premium is $285.
At age 52, Sarah is diagnosed with early-onset Alzheimer's and can no longer perform 2 of 6 activities of daily living independently. She qualifies for the chronic illness living benefit.
| Death benefit | $500,000 |
| Chronic illness benefit (up to 90%) | $450,000 |
| Monthly payout for care (over 4 years) | ~$9,375/mo generally income-tax-free |
| Remaining death benefit for family | $50,000+ |
Without living benefits, Sarah's family would need to fund her care out of pocket ($108K+/year) or deplete retirement savings. The living benefit replaces the need for a separate long-term care insurance policy.
Living benefits are especially valuable for families concerned about the cost of long-term care, those with a family history of Alzheimer's or chronic illness, anyone who wants dual-purpose protection (death benefit plus care funding), and people in their 30s–50s who want to lock in rates before health changes.
For a comprehensive deep-dive on living benefits, including detailed carrier comparisons, check out our complete Living Benefits Guide.
Living benefits allow you to access your life insurance death benefit, generally income-tax-free under IRC 101(g), while still alive if diagnosed with a terminal, chronic, or critical illness. They are included as riders on many modern life insurance policies.
In most cases, yes. Living benefit payouts from life insurance policies are generally received tax-free, though you should consult a tax professional for your specific situation.
Living benefits can serve a similar function to LTC insurance. The key advantage is that if you never need care, the death benefit still pays out to your family, unlike traditional LTC premiums which are lost if no claim is filed.
Most policies allow access to 50-100% of the death benefit depending on the carrier and the type of illness. The remaining balance passes to beneficiaries as a death benefit.
Accelerated death benefit riders are not long-term care insurance and are not a substitute for a long-term care insurance policy. Accelerating any portion of the death benefit reduces - and may eliminate - the death benefit payable to your beneficiaries, and reduces the policy’s cash value and loan value. Benefits received may be taxable depending on how the rider is structured and your individual circumstances (see IRC §101(g)); consult a qualified tax advisor. Receiving accelerated benefits may affect eligibility for public assistance programs such as Medicaid or SSI. Rider availability, trigger definitions, benefit amounts, and any associated costs vary by carrier and by state, and are governed solely by the terms of the issued policy contract.