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What is Mortgage Protection with Living Benefits?

Living Benefits Can Provide You the Money You Need When You Need It Most to Stay in Your Home


In short, living benefits are benefits from a life insurance policy that you don’t have to die to use. In many instances, if you get sick or injured you can access a portion of your death benefit while you’re still alive. You can use that money for whatever you want, usually tax free. Think about the ways that money can protect your family and your mortgage! Each insurance company is a little different in how their benefits are structed, but in broad strokes most plans here with AIG, American National, and Transamerica include three main categories of living benefits:

Qualifying Critical Illness

This allows the policy owner to accelerate a portion of the death benefit in the event the insured is diagnosed with a Critical Illness or Condition. The following qualifying illness or conditions are defined in the rider:

  • Major Heart Attack
  • End Stage Renal Failure
  • Coma
  • Coronary Artery Bypass
  • Sever Burn
  • Paralysis
  • Stroke
  • Major Organ Transplant
  • Invasive Cancer

Blood Cancers: Leukemia, Lymphoma, and Multiple Myeloma

Qualifying Chronic Illness

This allows the owner to access most of the death benefit when the insured is diagnosed with a chronic illness or condition by a licensed health practitioner. The trigger to this benefit is when the insured:

  • Is unable to perform at least two Activities of Daily Living; or
  • Requires substantial supervision by another person to protect the insured person from threats to health and safety due to severe cognitive impairment.

Activities of Daily Living: Bathing, Dressing, Toileting, Transferring, Continence, Eating

Qualifying Terminal Illness

This allows the owner to accelerate most of the insured’s death benefit in the event of a diagnosis of a terminal illness. This is determined by a licensed physician diagnosis of a reasonable expectation of the insured’s death within 24 months from the date of certification.

Four Families Whose Life were Impacted by the Living Benefits from a Mortgage Protection Plan

Pablo and Estella found the perfect home to raise their family in the Orland Park, away from the violence of the city and with good schools and a real feeling of community. After they closed on the home, they invested in a term policy to cover the 30 year duration of their mortgage. One day Pablo, who works as manager at a manufacturing facility near Midway Airport, was feeling lightheaded and became concerned when he lost his balance and felt real weak on the left side of his body. His coworkers rushed him to the ER where it was discovered he was having a stroke. Luckily Pablo survived and is still with us today, but this was going to have a profound impact on both his and Estella’s lifestyle. Because Pablo and Estella had taken care of that Mortgage Protection Policy years ago, the insurance company could trigger the Critical Care Rider and step in to provide a portion of the death benefit when the family needed it the most. While Pablo rehabilitated, Estella could be there with him and together they didn’t need to worry about where the house payment was coming from. During the 6 months that Pablo was not bringing home a paycheck, they never worried about losing the house.

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Greg is a bachelor living the bachelor lifestyle working at an IT company and bought a new townhouse in the Lincoln Park neighborhood. Greg makes good money, has good benefits at work and loves his new Audi TTS Coupe, especially on Lake Shore Drive. Unfortunately, one night he took the S curve on North Lake Shore Drive a little faster than the car could handle, flipping it in the process. Greg survived the crash, but is left permanently in a wheel chair and unable to perform several of the activities of daily living without significant assistance from his brother. Because Greg had purchased an Indexed Universal Life Mortgage Protection Plan with the Chronic Illness Rider, the insurance company was able to pay out 90% of the coverage amount, tax free, directly to Greg. Greg’s brother volunteered to take time off from his career to help Greg adjust to his new lifestyle, so Greg used a portion of the benefit to help his brother recoup some of those lost wages. Without his brothers help, and the resources provided by the policy, there is no way Greg would have been able to stay in his home.

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Samar and Prisha have always been very dedicated to their family. Once their children had both graduated from college and moved out of the house, they decided to buy a small but nice house in Naperville to begin to plan for retirement. At the time, they decided to protect their mortgage with a Guaranteed Universal Life Mortgage Protection Plan that would remain in force for the remainder of their lifetimes. Soon after, however, they got news that Prisha had developed a rare type of blood disorder that was projected to kill her within 2 years. Because that Mortgage Protection Plan included a Terminal Illness Advance, they were able to access 90% of their benefit, tax free, and payable directly to Prisha. They thought they might have an opportunity to try to extend Prisha’s lifespan by trying an advanced treatment available in India, where her extended family still lived. That money allowed Prisha to live out her final days in the country from which she was born and not have to worry about Samar’s ability to maintain his home back in Naperville.

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It was always important to Brandon and Keisha to never become a burden on their children. When they bought what would be their last home in Downers Grove, their wish was that the home value could eventually be passed down to their children and grandchildren to act as a legacy of sorts. They purchased a Guaranteed Universal Life policy on each of them shortly after closing on their home. They were both in good health, and the premiums seemed reasonable for the peace of mind they would provide. They lived in that house together for another 8 years, some of the happiest years of their lives. Brandon, unfortunately, passed away after a brief battle with an aggressive form of cancer. They had Brandon’s pension coming in, and a good Medicare Supplemental policy, so money was not a concern as he fought his last fight. After Brandon passed, Keisha used his Death Benefit to pay off the remainder of the loan on the house, and still had some left over to spend some time with family out of state. Keisha died later the same year, some say it is from a ‘broken heart’ why so many long time lovers die so close together. The family received Keisha’s death benefit, along with the proceeds from the sale of the house some time later, and it was enough to get the grandkids well on their way to their college education. The family will never know how much peace of mind it gave Brandon and Keisha that because of the act of love applying for Mortgage Protection Insurance they would never be a burden on their family. That gift of a college education for the grandchildren is Brandon’s and Keisha’s legacy to their family.

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