Accessibility
Employer-Provided Life Insurance
Either term policy or group whole life insurance. You can enroll in these policies during your open enrollment through your employer. Employers often offer a small amount free to you as well as to spouses and eligible children.
Supplemental Life Insurance may be offered that you can sign up for at higher amounts. You are responsible for the premiums. You may also need to get medical underwriting for the supplemental amounts. This policy is often portable after your employment ends with the employer.
Private Life Insurance Policies
When you purchase from an insurance company, you are required to pay the premiums to keep the policy in force. If a term policy depends on the amount, underwriting may be required.
For permanent policies, medical underwriting is required unless it is a guaranteed issue policy that may not take into consideration your medical history. These policies are generally for lower death benefit amounts and are more costly.
Options for Usage of Cash Value or Death Benefit
Most insurance companies offer accelerated death benefit options to the insured at issue. This will allow you to access a portion of the death benefit before death if you are considered terminally ill. (Death imminent within 12 mos.).
If you have a cash value policy:
- You may access the cash value or death benefit through withdrawal or loan.
- Check your specific policy to confirm available options.
Considerations when dealing with cancer:
- Obtaining new life insurance can be more difficult, if not impossible, when diagnosed.
- If still employed with insurance options through your employer, it’s recommended to secure this coverage.
Portability options to consider:
- Look for portability features (ability to retain coverage if employment ends), often available with supplemental life insurance.
- Another option may be obtaining insurance through a spouse’s employer; confirm if it remains portable if they change jobs.
Accelerated Death Benefit
Many patients are not aware that most policies offer an Accelerated Death Benefit free of charge, which is included at the purchase of the policy. This allows the patient to have access to the value of the policy if the patient has a terminal illness and, depending on the policy, has a life expectancy of six months to two years. Patients with certain disabling conditions can also qualify for Accelerated Death Benefit regardless of life expectancy. This can vary between policies, but generally the benefit is 50 to 80 percent of the policy value.
Anyone who has a terminal condition should explore the Accelerated Death Benefit option. Patients with other conditions, such as ALS, those requiring artificial life support or people with organ failure who are not transplant candidates may also qualify depending on their policies and state laws.
Who can apply if it is a group policy?
The patient, their dependent spouse, or domestic partner can apply.
How can the funds be used?
Usually, there are no restrictions on how the cash can be used. Patients can pay for:
- Medical bills
- Medications or experimental treatment
- Pay-off a mortgage
- Daily living expenses
- Making financial arrangements for their family
- Taking a vacation
Before deciding to take the Accelerated Death Benefit, speak to the insurance company to see what limitations, if any, are attached.
Group life insurance policyholders can contact their human resources department or life insurance carrier for more information about Accelerated Death Benefit.
Types of Life Insurance and Why You Need to Know the Difference
Life insurance is a contract between the owner and the insurance company that they will pay a benefit to your beneficiaries at your death as long as you have maintained the requirements of the contract, such as paying the premium.
Many life insurance policies have built into them additional benefits that people who have become very ill may be able to utilize death benefits before death for their medical expenses. Available through an accelerated death benefit rider and is commonly free on most policies. This policy does not build cash value.
Term Insurance
This is considered a pure life policy. It is in effect for a specified period, for example: 5, 10, or even 30 years. After this period is over, the policy terminates. You may have the option to convert to a permanent policy for a period of time before termination without having any medical underwriting.
There are also Permanent, Cash Value Policies such as Whole Life, which provides a guaranteed death benefit for the entire life of the insured.
Benefits:
- Income tax-free death benefit to beneficiaries – generally not subject to income taxes.
- Tax-deferred growth – The cash in the policy is tax-deferred as long as funds remain in the policy.
- Tax-efficient access to policy values via withdrawals – Under favorable First-In-First-Out will allow for cost basis to be taken free of income tax.
- Tax-favorable access to loans for any reason – Loans that can be taken during the insured’s life against the whole life policy are not considered a taxable event, even though the policy may have a large gain in excess of the premiums paid.
- Disability protection – The policy can continue to be funded even if you’re disabled. If you select the Waiver of Premium rider so that if you suffer a qualifying disability, your policy will continue to provide death benefit protection and have cash value growth even if you’re not still paying premiums.
- Liability protection – In many states, the benefits of life insurance are protected from the claims of creditors.
Insurance can help you avoid probate and provide beneficiaries with privacy. Whole-life policies provide you with the ability to pay loans back from anticipated earnings. Whole-life policies can be used as collateral for loans.
The whole life policies can be either participating or non-participating, which is defined by whether or not the cash value receives dividends from the life insurance company.
Universal or Adjustable Life Policies
Provide a lot more flexibility than whole life policies. You may be able to increase the death benefit if you pass medical underwriting. The savings component usually earns a money market rate of interest. You may also be able to alter your premium payments.
Variable Life Insurance
Combines death protection with a savings account that you can invest in stocks, bonds, and money market mutual funds. The value of your policy may grow more quickly, but you also have more risk. Additionally, if your cash value underperforms, your cash value and death benefit may decrease.
Variable Universal Life Insurance
You get the features of the universal life policy and the features of a variable policy. You have the investment risk and rewards as well as the ability to adjust premiums and death benefits.
Indexed Universal Life Insurance
Offers a cash value component along with a death benefit. The cash value can earn interest through tracking an equity index selected by the insurer, and can also usually be partially allocated to a fixed-rate account.
Guaranteed Life Insurance
Pros:
- These types of policies help provide coverage for those individuals who may have a difficult time getting life insurance due to an existing illness or health risk.
- Guaranteed issue means you will not have to take a medical exam or complete medical questions.
- The death benefit is usually between $2,000 and $25,000.
Cons:
- This type of policy is available for the primary insured only.
- May be fully functional only after a period of 2 to 3 years.
- If the insured passes before the waiting period, the beneficiary will not receive the death benefit. A beneficiary may receive premiums paid into the policy.
- Age requirements, usually between 50 and 80 years old. Some are available for 45 to 85.
- Qualifications can depend on your age and location.
- Usually more expensive than the typical term and whole life because of the greater risk.
Diahanna Vallentine, BCPA, Financial Empowerment Lead
In 2002 Diahanna and her husband received the news that her husband had MGUS, a precursor to Multiple Myeloma. Upon her husband death in 2013, Diahanna immediately decided to make it her mission to help patients and caregivers empower themselves to speak up and to position themselves as partners in their treatment. Diahanna became a Board-Certified Patient Advocate. She is currently the Financial Myeloma Coach for The Myeloma Crowd Foundation.
