When it comes to purchasing a life insurance policy, particularly for those purchasing a life insurance policy for the first time, there are a lot of different terms that get “thrown” around which can certainly confuse somebody that isn’t totally familiar with all of their meanings.
We here at InsuranceBrokersUSA have found that not everyone knows what an Accelerated Death Benefit rider is nor are they aware of how one works. For this reason, and in the interest of making all things life insurance-related easier to understand, we have compiled a brief guide for you here today!
So, first things first, what is an Accelerated Death Benefit?
First and foremost, we should note that accelerated death benefits can also be called a ‘Living Benefit’ (which is a much nicer term by the way). And are riders that can be added to your life insurance policy so that you can access a certain amount of your death benefit early in the event that you become diagnosed with a terminal illness.
At first, the rider was introduced to the market for those suffering with HIV/AIDS but these days it is available to everyone with a terminal illness including cancer, kidney failure, and various others.
Why would anyone what to be able to “dip” into their life insurance death benefit?
Well, at first this may seem obvious why someone may wish to “dip” into their life insurance death benefit, but when you begin to look at everything that is involved in treating a terminal illness, having access to a portion of your life insurance before you die can make sense to some people.
Nobody really likes discussing this topic, having access to a portion of one’s life insurance death benefit will also give the insured a chance to make sure that some of his/her financial wishes are taken care of prior to death such as:
- Paying off a mortgage.
- Paying off any medical benefits.
- Or simply taking care of one’s own final expenses.
And again, even though it’s not something that people like talking about, knowing that you’ve been able to take care of your family before you pass on can provide an enormous “emotional” benefit to someone that is significantly ill.
How much of the death benefit can a terminally ill patient receive if they’ve purchased an Accelerated Death Benefit?
Earlier, we said that you will receive a certain percentage of your death benefit but how much is this? In truth, we cannot give you a definitive answer here because it will vary from one provider to the next. Whilst some offer 25% early, others go all the way up to 90% and beyond so you will need to know the exact percentage before adding it to your policy.
You’ll also want to consider this “percentage of access” in determining which life insurance company is going to offer you “best” life insurance policy if having an Accelerated Death Benefit is important to you.
What happens to your beneficiaries after if you use your accelerated death benefit?
After you pass away, whatever is left in the policy will go to your beneficiary as originally planned. If you happen to recover from the illness, you will not have to make repayments as you followed the word of the contract and rider (Accelerated Death Benefit).
If you receive funds early from your policy, they will not be vulnerable to tax because you will be terminally ill (expecting to die within two years). If you are currently looking at health insurance too, please note that this is NOT a replacement and shouldn’t be seen as such under any circumstances. Instead, the money you receive from your life insurance should be used to supplement any other insurance you have (primarily, health insurance).
If you have any concerns about your personal scenario or circumstance, be sure to contact a professional as they can guide you in the right direction. For example, most people receiving the living benefit will have their Medicaid and SSI affected so you will need to know the different variables.
So how does it work? How do they differentiate between ‘terminal illness’ and any other health issue? Ultimately, an illness will be considered terminal if medical professionals believe your life expectancy to be under two years. Additionally, it will be an illness that severely reduces your life span, requires some form of transplant, or requires you to stay in a long-term care facility.
Pros – With all of this information in mind, what are the benefits of having this rider in place on a life insurance policy? Firstly, it keeps you protected against terminal illness just in case something bad happens in the future. Without this protection, an illness could financially cripple you and your family and we have seen numerous examples of this in the past. Just having this small addition in place, you can ensure a comfortable (as can be) time of it ensuring funds for treatment, assisted living, home care, or anything else.
Cons – On the flip side, we only see one real disadvantage and this is the limitations for those who aren’t ‘terminally ill’. For example, not all companies will cover chronic illness because this doesn’t always shorten the lifespan regardless of how much it may affect one’s life. However, reading the fine print and knowing the details of your policy will remove this problem.
Summary – In today’s world, we have technology to deal with a number of health issues. However, terminal illnesses still affect thousands of people every year. If you’re interested in adding this rider to a policy already in action, be sure to contact your provider to see if it is available. For those without a policy, we highly recommended choosing this option because we have spoken to many people who regret omitting it when they first set up their policy!
The real trick…
If you are truly interested in purchasing a life insurance policy with an accelerated death benefit is to make this “feature” a priority in your search and then seek out only those companies who offer an accelerated death benefit automatically or offer it as an available rider for purchase.
And guess what?
Because we here at InsuranceBrokersUSA work with dozens of different life insurance companies, we can do this for you and we can do it FAST!
So what are you waiting for? Give us a call today and see what we can do for you!