If a person with life insurance becomes terminally or chronically ill, an accelerated death benefit rider lets them receive part of the death benefit money. This option is also called living benefits. It can provide money for medical expenses and end-of-life care.
Typically a death benefit is paid out only when a person with life insurance dies, and that payout goes to beneficiaries named on the policy. For an accelerated death benefit, some or most of the death benefit money can be paid early. If that happens, the beneficiaries will receive whatever is left of the death benefit when the insured person dies.
How to get accelerated death benefits
An accelerated death benefit is a common option for life insurance and might already be included on a policy you buy. If not, you can typically add it for a small charge.
It could be available on term, universal and whole life insurance policies.
Your policy or living benefits rider will outline the triggers for getting the money early. According to the American Council of Life Insurers (ACLI), these typically include:
- A terminal illness and life expectancy of less than 24 months.
- An illness that will mean a very reduced lifespan without a lot of medical treatment, such as AIDS.
- An illness that requires major medical treatment, such as an organ transplant.
- Needing long-term care because you can't do basic activities of daily living, such as eating or dressing.
- Being permanently confined to a nursing home.
The policy or rider will also say how much of the death benefit would be available. It's generally 25% to 95% of the death benefit amount, according to the ACLI. Also look for how the money would be paid out -- for example, monthly or in a lump sum.
If you have a cash value life insurance policy with an outstanding loan, it will reduce the amount available for a living benefits.
If you recover from the illness, you do not need to pay the money back.
Since an accelerated death benefit is often included or at a small cost, it's worth asking about when you buy life insurance.