Accelerated Death Benefit: Do you have people depending upon your income or on any service you provide, such as your wife, children, younger ones, etc., it is important you have a policy and an insurance.
Life insurance is intended to provide for your loved ones if you pass away. As such, while your policy is in effect your death does not result in your family facing financial devastation.
There are different kinds of life insurance policy. In other words, there are many policies issued by many insurers, and each policy and life insurance company has its own terms. There are also add-ons, or riders, you can add to your policy to expand the scope of your coverage.
For example, you could add a rider onto your policy that provides for an accelerated death benefit (ADB). If you attach this benefit to your life insurance policy you will be able to claim a portion of your death benefit early under certain circumstances.
Thus, with accelerated benefits on your policy, you not only know your family will be provided for if you pass away, but you also have the peace of mind of knowing you can access some of your benefits before your death if you get very sick. Accelerated benefits are like living benefits.
Having said that, there is need to define what an accelerated death benefit is in a more elaborate manner.
What is Accelerated Death Benefits?
To have a fair understanding of accelerated death benefit, it is important to first understand what a death benefit is. A death benefit is the amount of money the insurer pays upon your death if you are covered by a life insurance policy.
This type of benefit was originally started in the late 1980s in an attempt to alleviate the financial pressures of those that were diagnosed with AIDS.
An accelerated death benefits (ADB) is a benefit that can be attached to a life insurance policy that enables the policy holder to receive cash advances against the death benefit in the case of being diagnosed with a terminal illness.
Many individuals who choose an accelerated death benefits have less than one year to live and use the money for treatments and other costs needed to stay alive.
Importance of Accelerated Death Benefits
Some of the importance of accelerated death benefits are:
Choosing an insurance policy with an accelerated death benefits (ADB) allows the policy holder to pay for their daily living in an effort to make it as comfortable as possible while also allowing the holder to look after their family once they pass away.
The accelerated death benefits provision is also known as a ‘living benefit’ rider or ‘terminal illness benefit’. With accelerated death benefits, you are able to borrow from the death benefit so you can claim a portion of its cash value while you are still alive.
An Accelerated Death Benefit Helps Your Family in Times of Hardship. If you can add the option for an accelerated death benefit onto your life insurance policy for an affordable cost, there is little reason not to take this added protection.
Typically, you will not be taxed on the money paid out when you claim an accelerated death benefit as long as you do have a terminal condition expected to result in your death within two years.
Is an Accelerated Death Benefit a Good Idea?
Adding an accelerated death benefit rider onto your insurance policy is usually a good idea. This is typically an affordable policy rider, and it may even be included as a standard option in some types of whole life insurance policies.
Accelerated death benefits are a good idea because, while buying this life insurance rider, it gives you the flexibility you need to make a difficult choice if you get sick, ultimately you will need to consider your overall financial situation, your family’s financial needs, and so on.
It is a good idea because its additional coverage would be far more useful to someone without good disability, medical, and long-term disability insurance, for example.
Important Things to Note about Accelerated Death Benefit
It is important to note that this is not a substitute for other kinds of insurance. While it can help cover costs if you incur nursing home or long-term care bills or if an illness puts you out of work for a while; it is not designed to cover every expense of serious illness.
Furthermore, you still need other types of insurance, including health insurance, disability coverage, and long-term care insurance to maintain your family’s financial situation if you become seriously ill.
Also know that the portion of your death benefits amount you accelerate will supplement, not replace, these other types of coverage.
Some Features of Accelerated Death Benefit
Below are some of the features of accelerated death benefit:
Accelerated death benefits are typically not taxed as income.
In order to qualify for an accelerated death benefit, a policy owner needs to provide proof that he or she is chronically or terminally ill.
Taking accelerated death benefits will reduce the amount of money received by beneficiaries.
It may be possible to borrow money from a life insurance policy rather than receive benefits in a lump sum.
Qualification for Accelerated Death Benefit
Some policies might make an accelerated death benefit available even if it’s not mentioned in the contract. You qualify for accelerated death benefits if you contract a terminal illness and are expected to die within two years.
You also qualify if you have been diagnosed with an illness that will reduce your expected lifespan, if you need organ transplant because of illness, or if you are in hospice long-term care.
Accelerated death benefits are also a possibility if you need assistance with everyday activities like bathing or using the toilet. Receiving an accelerated death benefits can affect your eligibility for Medic aid and SSI.
In a Nutshell
Since accelerated death benefits is a one that can be attached to a life insurance policy that enables the policy holder to receive cash advances against the death benefit in the case of being diagnosed with a terminal illness, it is a good one.
And also, since the cost of a living benefits can vary according to insurance company and policy accelerated death benefits is apt to take because usually it is tax-exempt for individuals expected to die within two years.
Thus, this type of benefit is not meant to substitute for long-term care insurance coverage. It should be used to supplement expenses not covered by a long-term care policy.