More Than Just Life Insurance

Most of us do not like to contemplate death or critical illness and yet it makes sense to get some cover in place just in case the unthinkable should happen. It is a sad fact of life that not all of us will reach our three score and ten and one thing we do not want is for our relatives left behind to face a financial burden.

However, there are occaisions when critical or terminal illness will mean that our last days can be made much more confortable and bearable, if the policy we choose has the option of paying out before we die.

Known as accelerated death benefits, these are special features that are  available on both term and life insurance policies that offers a unique value to individuals who suddenly become seriously ill with a potentially life-threatening disease or condition.

They allow individuals to collect on funds while they are still living. This is why they are called accelerated. They are also commonly referred to as living benefits since the policyholder has the ability to gain access to them through special circumstances whilst still living.

Not all insurance policies include this type of benefit, so it is important to ask your insurer whether or not your policy offers it. Some insurers might require your policy to provide a certain amount of normal life cover before you can include accelerated death benefits as an option.

Cover that Protects the Family in Difficult Times


How are They Paid Out?

The benefits are paid out according to the terms of the insurance policy. Typically, accelerated death benefits are paid on a monthly basis or as a lump sum. In most cases, federal income taxes are not involved, but it is important check to see what sort of illnesses qualify for tax exemption.

What Conditions Trigger Early Payout?

Typically, the funds become available when a policyholder is diagnosed with a terminal illness or some type of medical condition that makes them chronically ill. The exact terms of the policy dictate whether or not a policyholder is eligible to receive early payment of part of the benefits attached to the life insurance. One or more of the following conditions can lead to eligibility:

  • The need for organ transplant
  • Acute illness diagnosis necessitating expensive, ongoing medical treatment
  • Terminal illness with a short life expectancy attached to the diagnosis
  • Disability involving long-term care for basic needs

Can Beneficiaries Still Collect Death Benefits if Accelerated Death Benefits Have Been Paid?

As always, much depends on the terms of the policy, which is why it is so important to carry out careful research before signing up. Examine the small print in detail and in particular look for exemptions and restrictions contained within the terms. Some policies may reserve a certain portion of the payout for after death. Of course, beneficiaries can collect on the amount that is remaining on the policy at the time that the individual dies. If there is no clause reserving a proportion of the benefits and the policyholder has had a long and difficult illness there may well be little or nothing remaining.

How Much of Your Policy Benefits Can You Obtain ?

The percentage of your death benefits that you can tap into early if you are diagnosed with a serious illness is contingent upon the terms of your policy. In many cases, the state you live in also plays a role in this determination. In any event, you cannot take out more money from the policy than its face value holds.

When is it Best to Include These Benefits  on a Life Insurance Policy?

This type of addition can be included at the time the initial policy is purchased, or it can be added as a rider that is attached to the policy at a later date. In some circumstances, the insurer even allows policyholders to add the rider to their policy after they are diagnosed. If the benefit is automatically included in the insurance policy when it is first taken out, no additional fee is charged. On the other hand if  added through a special rider at a later date, it is likely that an additional fee will be involved involved.

Coping With Loss