Can life insurance keep you out of jail?

How can life insurance keep you out of jail? How are the two even connected? Well,  we will answer these questions by exposing the rising problem many are facing and present you with a solution.

Stay with us and we would uncover an increasingly serious concern. It is really shocking to learn that in 2020 a father was sent to jail over his son’s medical bills. We will list scenarios, bust myths and offer a solution.

Can life insurance keep you out of jail

Let’s start with the root of the problem…

The rising number of medical bills and is it legal to go to jail over medical debt?

It is absolutely no secret that the medical cost is rising. More and more households are drowning in medical bills and have filled bankruptcy over it or lost their homes. Now, did you know that people have gone to jail over unpaid medical expenses?

Wait, a second… “I thought debt prisons are banned for over 100 years ago”. Well, think again!

Take a look at the story of a Kansas dad, who was sent to jail due to unpaid medical bills for his son. Mind you, his son was 5 years old and diagnosed with leukemia.

How is that even possible? Is it legal?

There is a new system in place. If you have unpaid bills, even medical bills, the creditor is trying to collect. If they are not able to, they sell your debt to a collection agency. Even though it is illegal for collection agents to use oppressive tactics to make you pay, they find a way. In many instances, they file a motion with the courts. Eventually, a civil matter could become a criminal and you could be jailed.

Now, let’s point out we are not attorneys. Our objective is not to give you legal advice or law lecture, but simply to point out something we found extremely disturbing.

People are supposed to show in front of the courts to list their assets and to do “debtor’s exam”. In other words, prove they are poor enough to pay the medical bill (or any other bill for this matter).

Failure to appear in front of the court leads to the issuance of a warrant for their arrest. Often times, people are not even aware that they will be arrested and taken to jail.

When researching for the article, we stumbled upon stories of people taken to a jail right in front of their children for bills under $100-$250! The most disturbing part is this is all legal. Simply mind-blowing.

Past due

According to a report from ACLU (The American Civil Liberties Union), there are currently 44 states in which a civil court judge could issue an arrest warrant for debtors.

Do you wonder which states are the most egregious abuses? According to the same publications, Maryland and  Massachusetts, even though they are currently considering legislation to reduce such warrants.

So, what can you do to protect yourself?

If you are faced with staggering medical debt and you don’t have the money, you could consider filing for bankruptcy. In fact, over 65% of the bankruptcies filed over medical bills. Even though this is a possibility, it is not the best solution for every situation.

What we are suggesting is securing life insurance with living benefits.

So how exactly can life insurance keep you out of jail and what are living benefits?

Below, we’ve answered the most common questions we’ve received during our 15 years of practice.

What are living benefits?

Living benefits, as often referred, are in fact acceleration benefit riders. They allow the insured to file a claim against his or her life insurance policy and accelerate, use a portion of his death benefit while still alive. In other words, you don’t have to die for your life insurance to payout. What!? Yes, you can actually use the benefits of your own policy. This may be the only source of money for many families, allowing them to pay off their medical bills and avoid judgments.

Is life insurance with living befits a solution for every situation?

No, even though living benefits could be of tremendous help for families, they are not the answer to all medical concerns.

When can I use living benefits

Every company allows different triggers, or conditions that would qualify you to accelerate your policy. The main categories are for a chronic, critical or terminal condition.

Just to be more specific, you could file a claim against your death benefit, in the event of invasive cancer, stroke, heart attack, you are diagnosed with a terminal condition or you are not able to perform 2 out of the 6 daily activities of living (such as bathing, eating, dressing, toileting and etc)

In other words, if you won’t be able to use medical benefits under all circumstances, but in the event of a pre-policy set medical condition. While the conditions themselves are very common, they are not all-inclusive.

How exactly do living benefits work

Suppose you have a policy with living benefits (if you don’t, make sure you contact us immediately 🙂 ) and you are diagnosed with a qualifying illness. Your next step is to contact the company and ask them to accelerate your entire or portion of your benefits. 

Life Insurance for

FYI, some companies would allow you to accelerate your entire death benefit, while others would allow only a percentage.

Once you receive the claim package, you fill out and provide them with the contact information of the medical facility that will have your most complete medical history. The company will review your claim form and the medical records they’ve obtained. They will issue you an offer, based on the severity of the condition and how it is affecting your life expectancy.

After you receive their accelerating offer, you would have the right to accept or decline. Should you accept the offer, the company will issue a check payable to you and will either reduce your death benefit or completely cancel the policy. This is based on the percentage of acceleration you decide on.

Are living benefits an asset, do I need to disclose them on taxes or in front of the courts

Having the option to accelerate your policy is not considered an asset. Living benefits differ from cash value life insurance. You do not have to disclose them in front of the courts or on your taxes. It is a possibility of a payment that may occur. 

With that being said, should you accelerate your policy and receive a check from your policy, you would need to disclose the payment you received.

According to The U.S. Office of Personnel Management :

“ Living Benefits payments received on or after January 1, 1997, are not subject to Federal income tax. However, some states have laws, regulations, or rulings concerning the taxability of Living Benefits (also called accelerated death benefits). You should consult a tax advisor or your State’s tax department for specific information concerning State income tax laws.”

How to get life insurance with living benefits.

Well, that is easy…. Call us.

On a serious note, securing a life insurance policy with living benefits is quite easy. More and more carriers are realizing that consumers are looking for value and have these riders built into their products. 

There are many companies offering living benefits. Some of the carriers are:

  • American National
  • Foresters
  • Nassau Re 
  • Transamerica and etc.

A policy with living benefits is oftentimes priced very close to a policy that does not offer this added feature. 


Another benefit that many of our clients like is that you might be able to secure a policy with living benefits, without having to get a medical exam.

In conclusion,

We know that it is hard to imagine that life insurance can keep you out of jail. The point in this article is to expose a system that legally putting people in jail over medical debt. We want to advise our readers that there is so much to life insurance than simply death benefit. Having the peace of mind that you could accelerate your death benefit and receive money TODAY is a breath of fresh air for many families.

Please feel free to reach out to us if you have any questions or would like us to provide you with a personalized solution. We are strong believers in educating our customers and present them with the best options for them.

Thank you!