Enhance Your Whole Life Insurance Policy with the Accelerated Death Benefits Rider

By Tes Kurtz on February 4th, 2010

Life insurance is meant to provide financial security for loved ones when the policyholder passes away. But under certain circumstances it might be beneficial to access the insurance policy benefit while you are living.

Accelerated Death Benefits Rider

In the event of a terminal illness, the accelerated death benefits provision, also known as living benefits, allows the policyholder to access the insurance policy benefit. The accelerated death benefits provision is sometimes provided within your whole life insurance policy. However, the benefit is typically added as a rider, an attachment to your policy that changes the terms or coverage of your policy, to a new life insurance policy.

How It Works

Many serious medical conditions require costly care. The accelerated death benefits rider can take funds from the whole life insurance benefit to pay for certain medical conditions outlined within the terms of the rider. There are a number of medical circumstances that this rider may help cover:

  • Terminal Illness. Limited life expectancy, usually 6 months or less
  • Catastrophic Illness. This may include, but is not limited to, cancer, stroke, and paraplegia
  • Extraordinary Medical Intervention. Such as an organ transplant or the continuous need for life support
  • Long-Term Care. Needed when you are unable to perform basic day-to-day tasks such as bathing, dressing, eating, etc.
  • Permanent Nursing Home Confinement. In the event that round-the-clock medical care is needed that only a nursing home can provide

With an accelerated death benefits rider added to your insurance policy, you can collect between 25%-100% percent of the death benefit to pay for medical care costs.

Cost of an Accelerated Death Benefit Rider

Typically, the accelerated death benefits rider is figured into your whole life insurance policy as a percentage of its base premium. Some insurance companies do not charge you for this rider unless you use it. If this is the case, the death benefit, the amount of money beneficiaries receive at the policyholder's death, is reduced when the policyholder passes away. The reduced death benefit provides compensation to the insurer for lost interest because of an early payout; insurance companies may also add on a nominal service charge.

Accelerated Death Benefits Rider versus Viatical Settlement

If you are faced with major medical expenses because of the diagnosis of a terminal illness, a viatical settlement is another available option. As a policyholder and terminally ill patient, you can sell your whole life insurance policy to a viatical settlement company for anywhere between 55%-80% of the policy's face value.

Should you decide to sell your policy to a viatical settlement company, your loved ones will not receive the financial benefit from the insurance company. This is because the viatical settlement company becomes the beneficiary once you sell your policy. By adding an accelerated death benefits rider to your policy, you may not have to resort to a viatical settlement.

Accelerated Death Benefits Limitations

Medical care--especially when it comes to continuous treatment--can be costly. Additionally, health insurance coverage may not cover all the expenses incurred throughout a terminal or critical illness. However, it is important to keep in mind that the accelerated death benefits rider is not a replacement for health insurance or long term care.

The accelerated death benefits rider may provide you and your family with more options in the event of a terminal illness. However, before deciding to use your accelerated death benefits rider, you should consider how the reduced death benefit may affect your survivors.

Compare Quotes

If you are shopping for a whole life insurance policy, you should consider enhancing your coverage with an accelerated death benefits rider. Obtain several quotes and compare whole life insurance rates.

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