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What is an Accelerated Death Benefit Rider?



Why is a driver with accelerated death benefit automatically included on most policies?

Life insurance companies are not out to scam people. They are in the business to help them when they need it most, essentially when death is on the horizon.

Before these accelerated benefits were an option, desperate insured individuals began selling their policies to the highest bidder.

Basically, someone with a terminal illness would sell their life insurance policy at a discount so they could have money to pay medical bills and support their families. Then when that person died, the buyer would pay the full sum insured. This arrangement is called a viatic settlement.

Example:

Let̵

7;s say it’s 1980 and Jane Smith has a $500,000 life insurance policy, but the drivers of accelerated death have not yet been devised.

She is diagnosed with stage IV pancreatic cancer and given 8 months to live. She needs money to pay medical bills and would like to go on vacation to enjoy the rest of her life as much as she can.

John Doe agrees to buy Jane’s $500,000 policy for $150,000 cash and will continue to pay her premiums. He is basically investing in her short life expectancy.

When Jane dies, John will receive the full $500,000 death benefit. Jane’s original beneficiary receives nothing.

These viatic settlements were rare in the United States until the late 1980s, when the AIDS epidemic reached its peak. Many terminally ill AIDS patients needed money for treatment.

In 1993, the National Association of Insurance Commissioners (NAIC) developed the Living Benefits Model Act. In the creation of this law, it was proposed that insurers would be able to offer faster benefits to policyholders if they discover the policyholder’s plans to transfer or sell his or her policy. However, it was considered unfair not to offer this option to all policyholders.

It was then determined that these accelerated benefit options would be added to the contracts. This allowed insured individuals to use a portion of their policy’s death benefit when it was most needed without selling it off at a discount.

Most of the life insurance companies that Quotacy works with include the accelerated death benefit automatically on their life insurance products.

Some insurance companies waive riders to make the process faster and the premiums a little cheaper.

We provide individual reviews of each of the life insurance companies we work with here: Life Insurance Company Reviews. Select a life insurance company to read about their features and benefits. On these pages under the “Policy Riders” section it will state whether or not the company offers an accelerated death benefit.

If you’re ready to apply, there’s an easier way to find out if the policy you’re choosing has an accelerated death benefit option.

When you apply for life insurance on Quotacy, the individual company quotes also include the riders available. Just click on the “Ratings and Information” drop-down menu.

Screenshot of a quote showing options for child riders.

You can start by exploring costs with our life insurance quote tool. Or read more about different life insurance riders here: Types of life insurance riders.


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