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Living Benefits of Life Insurance

Updated April 2, 2024 . AmFam Team

You may have a decent understanding of the benefits of life insurance, like how it can help financially protect your loved ones in the event you were to pass away. But did you know that life insurance can also provide benefits while you’re still living?


You probably know that life insurance can help financially protect your loved ones if you pass away.

But did you know that life insurance can also provide benefits while you’re alive?

Certain types of life insurance allow the policy owner to build cash value that accumulates over the life of the policy.

Unlike a death benefit that pays out when the insured person passes away...

With this living benefit, the cash value money can be used while the insured is still alive!

For example, they can borrow against the cash value of the policy for emergencies or medical payments — and even to supplement their retirement income! The cash value of the policy is the insured’s to use as they wish.

Keep in mind, this money is considered a loan and will accrue interest.

If it’s not repaid before the insured person passes away, then the death benefit will be reduced by the amount of the loan plus any outstanding interest.

And, failure to pay the loan interest could result in the termination of the policy.

Examples of life insurance policies that allow the insured to build cash value over time include American Family Life Insurance Company’s Dream Secure Whole Life and Dream Secure Flexible Life Insurance policies.

And when you have a permanent or flexible life insurance policy, the cash value grows tax-deferred.

Another way to get living benefits out of life insurance is with a living benefit rider.

This additional coverage can help the insured customize their policy to better fit their unique needs.

For example, an accelerated death benefit rider may pay out a portion of the death benefit if the insured has been diagnosed as terminally ill, as defined by the rider. The money could be used for expenses such as medical bills.

Then, when the insured passes away, their beneficiaries would receive a reduced life insurance death benefit since a portion of the policy was already paid out.

In summary, the living benefits of life insurance are just one more way life insurance helps protect what matters most.

Ready to learn more?

Visit AmFam.com or talk to your American Family Insurance agent to learn more about your life insurance options.

Here’s a high-level look at some of the living benefits of life insurance.

What does living benefits of life insurance mean?

Life insurance allows you, the policy owner, to build cash value through your life insurance policy that accumulates over your lifetime. This is considered a living benefit of life insurance because, in contrast to a death benefit that pays out when you pass away, you can use the money while you’re still alive.

What is cash value in life insurance?

So, where does this “cash value” come from? Good question. You have the ability to build cash value with a cash-value life insurance policy, such as American Family Life Insurance Company’s DreamSecure Whole Life or DreamSecure Flexible Life Insurance. Typically, a premium for cash-value life insurance is more expensive than a term life insurance premium because it is long-term coverage (versus a specific length of time like term life insurance) and accumulates cash value over time.

Here's a closer look at the benefits:

Tax-deferred growth. When you have a permanent life insurance policy, the cash value grows tax-deferred.

Loans. You can borrow against the cash value of your policy for things like tuition payments, emergencies and even to supplement your retirement income. Keep in mind, this still is considered a loan, and if it’s not repaid before you pass away, then your death benefit is reduced by the amount of the loan plus any outstanding interest. Also, failure to pay loan interest could result in the policy lapsing.

College savings. If you have kids who will attend college someday, your life insurance cash value could be used to help pay for their schooling and it is currently not considered in federal financial aid calculations.

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What is a living benefit rider?

A living benefit rider is additional coverage on your basic life insurance policy that provides supplementary benefits and protection to you, sometimes at an extra cost. A rider comes in handy when you have specific needs that aren’t covered by a standard insurance policy. Basically, a rider is used to customize your policy to fit your needs.

For example, if you’re terminally ill, an accelerated death benefit rider may pay out a portion of your death benefit while you’re still alive. You could use the payout for things like medical expenses, among other uses, and when you pass away, your beneficiaries will receive a reduced life insurance benefit since you used a portion of the policy already.

The living benefits of life insurance can help provide additional layers of protection — just one more way life insurance helps protect what matters most. Talk to your American Family Insurance agent to see if your American Family Life Insurance Company policy has living benefits. In the meantime, check out our life insurance coverages to see which option is best for you and your loved ones.

This information represents only a brief description of coverages, is not part of your policy, and is not a promise or guarantee of coverage. If there is any conflict between this information and your policy, the provisions of the policy will prevail. Insurance policy terms and conditions may apply. Exclusions may apply to policies, endorsements, or riders. Coverage may vary by state and may be subject to change. Some products are not available in every state. Please read your policy and contact your agent for assistance.

Policy Forms: ICC17-225 WL, Policy Form L-225 (ND) WL, Policy Form L-225 WL, Policy FormICC17-225 WL, Policy Form L-226 (ND) WL, Policy Form L-226 WL, Policy Form ICC17-227 WL, Policy Form L-227 (ND) WL, Policy Form L-227 WL, ICC21 L141 MS 01 22, L141 ND 02 22, L141 SD 02 22

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