Accelerated death benefits are a relatively new option with life insurance. To be eligible for these benefits, you must in some cases be terminally ill or chronically ill. For policyholders with severe health conditions, it may be worthwhile to take advantage of this option.
How do accelerated death benefits work?
When you take accelerated death benefits, you get some of the benefits of your life insurance policy before your death. The insurance company determines the maximum amount, which can be as high as 95% of your death benefit. You make the decision about how much you want in advance.
This is usually only allowed for policyholders who are terminally ill with a life expectancy of two years or less. Even if you have to continue paying your premiums, you do not have to repay the accelerated amount of death. When the death benefit expires, that amount will be deducted from the face value of your policy.
What are the pros and cons of accelerated death benefits?
- You can use accelerated death benefits for any purpose you choose. If you are seriously ill, these funds can help cover home health care, a nursing home, hospital care or hospice.
- Your beneficiaries will still receive a death benefit, even if it will be reduced by your accelerated death benefit.
- Accelerated death benefits are not taxed.
- You must be terminally ill, or in some cases chronically ill, to qualify for quick death benefits.
- Generating a fixed amount of cash with accelerated death benefits can change your financial status, and possibly make you ineligible for Medicaid, supplemental social security or other benefits.
What are the eligibility requirements for accelerated death benefits?
Eligibility requirements for accelerated death benefits may vary depending on both the insurance company and the self-insurance policy. Usually, age is not a factor in eligibility. Marital status, veteran status, geographical location, income and assets are not eligible. The main factor is longevity.
Generally, your life expectancy must be two years or less to qualify for this type of benefit. Under certain policies, you may be entitled to faster death benefits with a longer life expectancy if you have a terminal illness. In some cases, you may be eligible for:
- You have a serious illness that will significantly shorten your life expectancy without significant treatment.
- You can not perform activities in daily life, such as swimming, grooming and getting around and therefore require long-term care services; or
- You are limited to a nursing home.
Policy requirements for faster death benefits
Your state of health and longevity are not the only requirements for faster death benefits. The policy requirements also apply. The impact on your life insurance is the biggest insurance factor. If it's less than $ 25,000, it would not be worth the effort to claim accelerated death benefits for you or your insurance company.
If you are considering taking accelerated death benefits, speak to our experienced agent. We can discuss the pros and cons with you and advise you on other available options for life policyholders.