Accelerated Benefit Riders for Life Insurance Policies

If you have a life insurance policy but you’re concerned about what might happen if you are diagnosed with a chronic or critical illness that involves long-term care, then an accelerated benefit rider may be a great option. Essentially, it may allow you to access your death benefit prematurely in the event of situations like these.

How it Works

There are several things that are used to determine whether or not an accelerated benefit rider is a good option. For instance, with some companies, these benefits are included in every life insurance policy at no additional cost. In others, it must be an addition to the original policy, but it doesn’t cost much annually. Then, if the policyholder becomes ill and needs long-term care, a portion of his or her death benefit will be paid out prematurely in an effort to help cover the costs.

Receiving the Benefits

Individuals cannot simply contact their life insurance providers on their own and request a partial payment of their benefits. In most cases, a notification of a terminal or severe chronic illness must be sent to the insurance company by a licensed, practicing physician. At this point, the insured may be asked to undergo some further tests performed by doctors that work for the insurance company directly. Once it has been determined that there is a serious illness, a portion of the benefits will be provided to the insured.

Conditions and Maximum Payments 

The portion of the value of the policy that can be paid out prematurely depends upon several factors, but the one with the most influence is the insured’s overall life expectancy. Many insurance companies will not put the rider into action unless a physician has stated that the insured has a life expectancy of between six and 12 months. Then, a portion that is a minimum of 25% and a maximum of 75% of the overall benefit can be paid early to help cover the costs of medications, medical bills and even hospice care. Most of the time, the maximums allowable are between $250,000 and $500,000.

Things to Consider

Before making use of an accelerated benefit rider, policyholders and their families should be aware that any amount that is provided to them prematurely will be treated like a whole life insurance policy loan. The amount will be subject to fees and any interest that accrues up until the time of the insured’s death. It is also important to consider that different insurers have different terms and conditions associated with these riders, so those who are considering them should take the time to shop around for the best overall value.

An accelerated benefits rider can help you if you are diagnosed with a terminal or chronic illness at some point in your life. While it is better to be prepared than to face such a financial crisis alone, there is always the possibility that you will never need to use the rider and that your family will receive your death benefit in its entirety.