What Are Life Insurance With Living Benefits In Canada?

Living benefits in life insurance policies allow Canadians to access part of their death benefit while still alive if they are diagnosed with a serious illness.

This following article of Life Buzz will explore life insurance with living benefits, the types of policies that offer them, how they work, their pros and cons, and how to add them to existing coverage.

What Are Living Benefits in Life Insurance?

Living benefits, also known as accelerated death benefits, are provisions in some life insurance policies that allow the policyholder to access a portion of the death benefit while still living if they are diagnosed with a serious medical condition.

The main types of living benefits offered in life insurance policies in Canada are:

Critical Illness – The policyholder can access the benefit if diagnosed with a severe or terminal illness specified in the policy, such as cancer, heart attack, stroke, or other life-threatening conditions. This provides funds to help cover medical expenses.
Chronic Illness – The insurer grants access to benefits if the policyholder cannot perform basic daily living activities due to chronic illness or aging. This covers costs for long-term care services.
Terminal Illness – The policyholder can access benefits if diagnosed with an illness likely to result in death within a specified timeframe, usually 6-12 months. This provides financial assistance at the end of life.

Living benefits offer Canadian policyholders financial security during difficult times. However, it’s important to note that using these benefits reduces the death benefit that beneficiaries will receive later. One of the main ways Canadians can utilize life insurance while still alive is through these living benefits provisions.

What Types of Life Insurance Offer Living Benefits in Canada?

In Canada, term and permanent life insurance policies can provide living benefits, typically by adding optional riders.

Term Life Insurance

With term life insurance, living benefits are usually available through riders such as:

Accelerated Death Benefit (ADB) – Allows accessing a portion of the death benefit if diagnosed terminally ill.
Chronic Illness Benefit (CIB) – Provides access to the death benefit if a chronic illness prevents working.

Some of the top Canadian insurers offering term life insurance policies with living benefit riders include:

Manulife – Offers an Accelerated Death Benefit rider that covers terminal and critical illnesses.
SunLife – Provides the Living Benefits rider covering terminal, critical, and chronic illnesses.
Canada Life – Critical Illness Protection rider pays up to $250,000 for covered illnesses.
RBC Insurance – Terminal Illness rider can pay 25-50% of the death benefit if terminally ill.

Permanent Life Insurance

With permanent life insurance, living benefits can be added through similar riders, such as:

Critical Illness Rider – Pays a benefit if the policyholder is diagnosed with a major specified disease.
Long-Term Care Rider – Provides access to death benefits to cover long-term care costs.
Disability Waiver of Premium Rider – Waives premium payments if the policyholder becomes disabled.

Some top Canadian life insurance providers permanent life insurance with comprehensive living benefits include:

Empire Life – Offers a broad range of living benefit riders such as Disability Equity, Lifetime Benefit Term, and Terminal Illness riders.
Equitable Life – Provides living benefits for terminal, critical, and chronic illnesses on permanent policies.
Foresters Financial – Includes Accidental Dismemberment, Critical Illness, and Disability Income riders.
SSQ Insurance – Critical Illness rider pays $25,000-300,000 depending on the coverage chosen.

The availability of specific living benefit riders depends on the insurance company and policy type. The best way to determine your options is to check with your insurer.

What Are the Pros and Cons of Living Benefits?

Living benefits have several advantages but also some potential drawbacks to consider:

Pros of Living Benefits

Financial protection for critical illnesses – Living benefits can pay for treatment costs if the policyholder experiences a major illness like cancer or a stroke. Having access to death benefits while alive provides crucial financial support during medical crises.
Coverage for long-term care needs – Benefits can help cover expensive long-term care services to assist with daily activities like bathing, eating, and dressing. For elderly policyholders, this can significantly affect quality of life and access to care.
Access benefits while alive – Policyholders can tap into death benefits without having to pass away first. This provides options for using your life insurance coverage while living.
Maintain financial stability – Being able to access funds if diagnosed terminally or critically ill allows policyholders to maintain financial stability despite health challenges. Living benefits help minimize the economic impacts of serious diseases.
Peace of mind – Knowing that you have the option to access death benefits while alive for medical or long-term care provides additional peace of mind. This security is powerful on its own.

Cons of Living Benefits

Reduced death benefit – Using living benefits lowers the payout beneficiaries will receive later. This trade-off needs to be evaluated depending on factors like your dependents’ financial needs.
Restrictive eligibility criteria – Strict rules may dictate who can access benefits and when. For instance, some critical illness riders only cover 4-5 specific conditions. Understanding restrictions is crucial.
Potentially higher premiums – Policies with living benefits often cost more than basic life insurance. However, the value gained from these provisions may outweigh the extra costs.
Administrative hurdles – The paperwork and approval processing required to access living benefits can seem daunting when you’re already facing illness. Some find the claims process overly invasive.
No residual payout – With certain living benefits, if you recover from an illness, the full death benefit is not reinstated. This reduces the future payout.
Not guaranteed – Insurers may deny claims or dispute diagnosis. Rejected claims lead to difficult appeals. Lack of guarantee creates uncertainty.

How Do Living Benefits Work in Canada?

When accessing living benefits in Canada, eligibility criteria and claim processes can vary by insurer. But some general guidelines apply:

Eligibility Criteria

Terminal diagnosis – The policyholder must be diagnosed with an illness likely to result in death within months. This is often indicated by a life expectancy prognosis of 12 months or less.
Inability to perform daily living activities – For chronic illness benefits, a doctor must confirm the policyholder can’t independently complete 3-6 basic activities of daily living defined in the policy, such as bathing, eating, dressing, continence, etc.
Critical illness diagnosis – The policyholder must be diagnosed by a physician with a major condition specifically covered under the critical illness rider, such as cancer, stroke, heart attack, and other severe diseases outlined in the policy.
Disability determination – For disability waivers or benefits, doctors must confirm the policyholder is fully disabled according to the policy definition, often for a minimum duration of 3 or 6 months.

Claim Process

Inform insurer – Contact the insurance provider and inform them you intend to file a living benefits claim. Then, complete the required forms provided.
Provide documentation – Supply supporting medical evidence such as test results, doctor’s notes outlining diagnosis, clinical determinations of abilities, and prognosis estimates.
Consent to records access – Sign consent forms allowing the insurer to access your relevant medical files and speak to your physicians to have supporting records released.
Insurer assessment – The insurer will evaluate your claim evidence based on policy criteria to determine approval. They may request supplemental documentation.
Benefits issued – Once approved, the living benefits are paid out in a lump sum to the policyholder. This may be paid in installments, depending on the insurer.
Claim times vary – The time to process claims can range from 4-8 weeks, depending on the complexity of evidence required and back-and-forth with the insurer.

How to Add Living Benefits to Existing Life Insurance

Many existing life insurance policies can be enhanced with living benefits through riders added after the initial purchase. Here’s an overview of the process:

Applying for a Rider

Contact insurer – Contact your life insurance provider to discuss adding a living benefits rider to your existing policy.
Choose a benefit – Select from your insurer’s available rider options, such as an Accelerated Death Benefit, Terminal Illness, or Critical Illness rider.
Submit application – Complete the rider application documents required by the insurer. You’ll need to provide your current medical history and consent for the insurer to access your records.

Insurer Evaluation

Medical underwriting – Even if your original policy didn’t require a medical exam, the insurer will likely re-evaluate your health before approving the rider. You may need to take new exams or take tests.
Financial assessment – The insurer will review your finances to determine if you can afford the new rider premium amount on top of your existing policy premiums.
Policy review – Details like your coverage amount, length, and type of existing policy also factor into whether a rider can be added. Permanent policies are often better suited for riders.
Application decision – After underwriting you for the rider, the insurer will either approve and issue the living benefits addition or deny it if you don’t qualify medically or financially.

Costs of Adding Riders

Higher premiums – Supplementing your existing life insurance with new living benefits will increase your total premium costs. The exact premium increase depends on the rider’s details.
Rider fees – Some insurers charge a flat dollar amount fee added to your premium when buying a rider. Others just increase the premium percentage.
Older age premiums – If it’s been many years since you took out the original policy, higher premiums will apply for the rider since you are now older.
Higher coverage amounts – If you choose a high dollar amount for the living benefits payout, this will raise premiums compared to a lower payout amount.
Policy changes – You may need to upgrade your base policy before the insurer allows adding certain riders, which can increase overall costs.

Your insurance provider can give you the most accurate estimate of premium increases for adding specific living benefit riders to your existing coverage.

What Are the Key Factors in Choosing Living Benefits?

life buzz quote in canada new 8 1 — What Are the Key Factors in Choosing Living Benefits?

When exploring life insurance policies with living benefits, keep the following important considerations in mind:

Living Benefit Details

Which illnesses or conditions are covered by each benefit option? Know the definitions and criteria for accessing benefits.
How much of the death benefit can you accelerate? Most policy amounts eligible range from 25-100%.
What policies and riders does the insurer offer? Find comprehensive living benefits.
What elimination periods or waiting periods apply before you can access benefits? Some have 0 days, others 90 days.
Are there benefit maximums, or are only 1-time claims allowed? Understand any limitations.

Product Quality and Features

Does the base policy also offer strong guarantees? Living benefits shouldn’t replace core protections.
What is the financial strength rating and reputation of the insurance company? Opt for established insurers rated highly by third parties.
How long has the insurer been providing living benefits on its policies? Look for extensive experience.
Are premiums and details guaranteed for life? Non-guaranteed products involve more risk.
Does the product offer built-in premium waivers for disability? This provides more protection.

Customization and Riders

Can you customize the policy to include other helpful riders beyond just living benefits? Add-on riders improve utility.
Does the insurer allow converting to permanent coverage in case your needs change? Conversion options provide flexibility.
Can you increase death benefits and living benefit amounts over time? Growing coverage keeps pace with your income and assets.

Cost Considerations

What are the monthly or annual premium costs? Get quotes from multiple insurers to compare.
Will premiums increase over the years? Understand how costs scale over your lifespan.
Does the insurer offer discounts for healthy lifestyles, group policies, or bundled products? Look into savings opportunities.
How do living benefits premiums compare vs. basic life insurance policies without the added features? Gauge value.

How to Find the Best Life Insurance Living Benefits

Follow this process when researching and choosing a life insurance policy with optimal living benefits:

Determine Needs

Take stock of your health, family medical history, ages of dependents, debts, assets and overall financial picture. This shapes the ideal living benefits.
Set coverage goals concerning income replacement, final expenses, mortgage balances, education funds, etc. This influences the death benefit amount.
Reflect on your budget and how much premium you can afford monthly or annually, both now and in the long term. This dictates what you can spend.

Research Insurers

Search for the highest financially rated life insurance companies providing living benefits in Canada. Consult reporting agencies like AM Best.
Visit insurers’ websites to browse living benefits policies and offerings. Download fact sheets, brochures, and product overviews.
Read online reviews and ratings for the insurer from policyholders sharing experiences. This provides qualitative insights.

Consult Advisors

Discuss needs with an independent life insurance advisor or broker who can explain options across multiple insurers. Their guidance is free.
Ask an insurance agent from a shortlisted insurer to explain details and quote costs. They know the products in depth.
Consult a financial advisor or accountant to ensure the life insurance plans align with your overall financial strategy.

Compare Options

Request quotes from your top insurers outlining available living benefits, riders, terms, premiums, discounts, etc. Compare offerings.
Have insurers run illustrations showing guaranteed cash values and death benefits over 10, 20, and 30 years. Assess long-term outlooks.
Never simply choose the cheapest premium alone. Weigh benefits, financial strength, experience, and customer service reputation.

Apply and Enroll

When you decide on a policy, complete the insurer’s application paperwork and medical requirements to undergo underwriting and secure coverage.
Make your first premium payment to put coverage into force. Understand grace periods and when you’re paid up to avoid lapses.
Notify your beneficiaries and keep records detailing your enrolled benefits and claim procedures for dependents.

What Are The Top Sources for Living Benefits Life Insurance?

Canadians have many options when shopping for life insurance policies featuring living benefits. Some top insurers to consider include:

Sun Life Financial
Manulife
RBC Insurance
Great-West Life
Canada Life
Industrial Alliance Insurance and Financial Services
Empire Life
Equitable Life of Canada

Independent life insurance advisors and brokers can provide additional guidance on finding the optimal living benefits product for your specific needs and situation. An advisor works with you as a client rather than representing any single company.

Key Takeaways on Life Insurance With Living Benefits

Living benefits allow Canadians to access part of their life insurance death benefit while alive if diagnosed with a serious illness.
The main types of living benefits are for critical, chronic, and terminal illnesses. These provide financial assistance for treatment costs and long-term care.
Both permanent and term policies can offer living benefits through riders, such as Accelerated Death Benefits. Availability depends on the insurer.
Pros of living benefits include covering critical illness expenses and long-term care. Cons are reduced payouts for beneficiaries and restrictive eligibility.
To access benefits, policyholders must provide medical evidence of diagnosis, and insurers determine claim approval.
Riders can often be added to existing policies but require health re-evaluation and increased premiums.
Those considering living benefits should research insurers, understand policy details, and consult advisors to find appropriate coverage.
The top factors to weigh are policy benefits offered, insurer reputation, customization ability, costs, and projected long-term value.
Leading Canadian life insurers offering comprehensive living benefits include Sun Life, Manulife, RBC Insurance, Canada Life, and Empire Life.

What types of conditions are covered by critical illness riders in Canada?

Critical illness riders typically cover severe illnesses like cancer, heart attack, stroke, paralysis, major organ failure, ALS, advanced Alzheimer's, major burns, and coma. The exact conditions depend on each insurer's policy definitions.

Where can I find the best living benefits life insurance policies in Canada?

Top insurers for comprehensive living benefits include Sun Life, Manulife, Canada Life, RBC Insurance, Industrial Alliance, and Empire Life. An independent advisor can help you compare and find the best policy for your needs.

When can I file a claim for living benefits on my life insurance policy?

You can file a claim as soon as you have the doctor’s diagnosis for a covered terminal, critical, or chronic illness or disability. Living benefits allow accelerating the death benefit while alive.

Why might my living benefits claim be denied by a life insurer?

Reasons an insurer might deny a claim include lack of sufficient documentation, not meeting the policy definition for a qualifying condition, or failing to disclose pre-existing health issues on application forms.

Do living benefits reduce the death payout my beneficiaries will receive?

Yes, any living benefits paid out will reduce the remainder of the death benefit later paid to your beneficiaries. This trade-off should factor into your coverage decisions.

How much does adding living benefit riders increase my life insurance premium?

Premium increases vary by insurer and desired coverage amount, but expect at least a 10-30% increase. Those with health conditions may pay higher premiums for riders.

Can I get a tax break for buying a life insurance policy with living benefits?

If an illness makes you eligible for disability tax credits, any living benefits received from your life insurance may qualify as non-taxable income.

Is a life insurance living benefit better than critical illness insurance?

Living benefits offer advantages like wider eligibility and keeping your base death benefit. Critical illness policies pay faster but have narrower condition lists and no residual payout.

How quickly are living benefit claims paid out by life insurers?

Claims typically take 4-8 weeks for approval and payout. Quicker processing may occur if you provide sufficient medical documentation upfront to the insurer.

Can I receive living benefits more than once from my life insurance policy?

Most insurers only allow accelerating your death benefit once, but some policies allow multiple claims. Check your contract terms for limitations.

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