A: A living benefit rider¹ is a general industry term for any rider on a life insurance policy that may allow for part of a life insurance policy’s death benefit to be paid out while you’re still alive if you have a qualifying condition, such as a terminal, critical or chronic illness.

While the main purpose of a life insurance policy is to provide a benefit to your loved ones when you pass away, being able to access benefits while you’re alive may be an important feature for you. Permanent policies may also allow for access to the accumulated cash value in the policy through loans or partial surrenders². Keep in mind, benefits on a life insurance policy can vary, depending on the type of policy.

Both term and permanent life insurance, such as whole life insurance, offer “riders” that could potentially provide payments while you’re alive. (Riders are additions to the life insurance contract that allow you to customize your policy.)

For example, you could purchase a chronic illness rider, which may pay a benefit if a covered illness limits your day-to-day abilities. A terminal illness rider could also allow you to access a portion of the policy’s death benefit before you pass if you meet certain conditions.

If you choose permanent life insurance, there can be several benefits available to you while you’re still living. For example, with index universal life policies (a type of permanent life insurance), cash value accumulates with the option to link to the performance of one or more stock market indices and is generally income tax deferred³. There is protection from direct market losses due to the index floor and uncapped growth with the S&P^® MARC 5% ER⁴.

Your local Farmers agent can help you understand your options for how to fund and structure a life insurance policy to align with your goals. A little planning now can go a long way toward a gentle landing in the future.

¹“NAIC WORD OF THE WEEK - LIVING BENEFITS RIDER”

²Cash values may be accessible through policy loans or partial surrenders. Policy loans that are not repaid and partial surrenders will reduce cash surrender value and death benefit. Policy loans are subject to interest charges. If your policy is a Modified Endowment Contract, loans and surrenders may incur taxes and penalties.

³Farmers^® entities, employees, agents, and representatives do not provide legal or tax advice. In general, partial or full surrenders from a permanent life insurance policy in excess of the policy’s basis are taxable. Limited circumstances exist where death proceeds will be taxable. This material has been prepared for general informational purposes only, and is not intended to provide and should not be relied on for tax, legal or financial advice. Because each individual’s situation is different, specific advice should be tailored to your particular circumstances; you should always consult your own tax, legal and other advisors before engaging in any transaction. This material reflects our general understanding of current law as of the date hereof, but tax laws and IRS administrative positions may change. This material is not intended to and cannot be used to avoid any Internal Revenue Service penalties. We specifically disclaim any liability resulting from the use or application of information contained in this publication. Farmers New World Life Insurance Company is not affiliated with or endorsed by any government agency.

⁴The "S&P MARC 5% ER Index" is a product of S&P Dow Jones Indices LLC or its affiliates (“SPDJI”), and has been licensed for use by Farmers New World Life Insurance Company. Standard & Poor’s^® and S&P^® are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”); Dow Jones^® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”). Farmers Index Universal Life is not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, or their respective affiliates, and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of the S&P MARC 5% ER Index.

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