What is an accelerated death benefit rider?

Many life insurance companies offer an assortment of additional policy features like an accelerated death benefit rider. Investing in a life insurance rider could make your policy more versatile in times of need.

There are many life insurance riders available to choose from. This article will serve to highlight when you might want to invest in an accelerated benefit rider, what it entails, and how it will affect your life insurance policy.

What is an accelerated death benefit rider?

An accelerated death benefit rider is an additional life insurance policy feature that offers accelerated benefits in certain scenarios. Accelerated benefits refer to an early availability of the death benefit to the policyholder which would typically only be paid out to a beneficiary once the policyholder dies.

Since an accelerated benefit rider provides a benefit to a living policyholder, it is sometimes referred to as a living benefits rider. According to the Alabama Department of Insurance, over 150 life insurance companies now offer some form of accelerated death benefits.

How does an accelerated death benefit rider work?

Accelerated death benefits are offered in more than one way. For starters, there are some specific riders that offer accelerated benefits for a specific reason. For example, you might find any of the following riders that could allow early access to a death benefit:

• Terminal illness rider
• Long-term care rider
• Disability rider

In short, if a policyholder becomes terminally ill, requires long-term medical care, or becomes permanently disabled, they may be eligible for accelerated benefits with each of the respective life insurance riders above. For reference, most disability riders offer premium discounts instead of accelerated death benefits, but that’s not always the case.

Some life insurance companies will offer an accelerated death benefit rider under a different name, so you’ll want to keep an eye out for all of these options.

Otherwise, should you become eligible for an accelerated death benefit, you will have access to all or some of your death benefit, depending on the company. Considering the cost of medical care and the potential for being displaced from work, this could be a major help to a policyholder that has encountered a major unexpected expense.

If a major unexpected expense would impact you and your beneficiaries, an accelerated death benefit rider could be of major assistance to you. Considering the costs associated with long-term care, this could prevent you from paying thousands per month out of pocket.

How much does an accelerated death benefit rider cost?

Many life insurance companies now offer accelerated death benefits for no additional monthly cost, but this isn’t always the case. Some companies even mention that the expense is situational. For example, Fidelity Life mentions that this rider often comes at no added cost but not always.

Other companies are less clear on whether or not they offer this rider free of charge for all policies. Allstate clearly offers a free long-term care rider for its group universal life insurance policies, but it’s unclear if this rider is provided complimentary with individual term and whole life insurance policies.

At the end of the day, it’s important to compare quotes from multiple companies to determine what your final life insurance costs will be. Some life insurance companies may charge a monthly fee for an accelerated benefits rider and still be cheaper than a competitor that offers the rider for free.

Your personal situation could dictate whether or not you’ll be eligible for an accelerated death benefit rider and if you’ll need to pay more for it.

How do I know if I’m eligible for an accelerated death benefit rider?

Most people will be eligible for an accelerated death benefit rider. At the end of the day, accelerated benefit riders would not cause the death benefit to increase but simply offer early access to the death benefit. So who wouldn’t be eligible?

Those with major health or occupational risks may not be eligible for an accelerated death benefit rider. Fidelity Life mentions that those with a pre-existing illness that could escalate to a terminal illness may not be eligible. Examples of disqualifying illnesses include cancer and kidney failure.

For what it’s worth, many life insurance companies won’t cover people with major health concerns like cancer at all. It doesn’t make sense for an insurer to risk paying out hundreds of thousands of dollars to someone who will only pay policy premiums for a year or two.

There are other circumstances in which an accelerated benefit rider may not be paid out despite being eligible. State Farm includes the following exclusions on its website, stating that no monthly benefit will be provided for loss that:

• Results from an attempted suicide or intentionally self-inflicted injury
• Results from the Insured’s alcoholism or addiction to drugs or narcotics — but not addiction which results from the administration of those substances in accordance with the advice and written instructions of a Licensed Health Care Practitioner
• Occurs or continues while the Insured is living outside of the United States of America or its territories or possessions
• Results from the Insured’s participation in a felony, riot or insurrection, or involvement in an illegal occupation
• Results from any act due to war, whether or not the Insured is in the military service. “War” means declared or undeclared war or military activity by one or more national governments and does not include terrorist acts, other random acts of violence not perpetrated by the Insured, or civil war or community faction.”

The above is a good example of why you’ll want to read the fine print surrounding any policy features you’re relying on. With State Farm, you could be withheld from an accelerated death benefit rider for self-inflicted or incidental issues.

Similar to general policy eligibility, the scenarios above may also disqualify policyholders from a death benefit entirely if they result in death rather than a terminal illness or relying on long-term care.

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Accelerated Death Benefit Rider: The Bottom Line

An accelerated death benefit rider is a valuable life insurance policy feature that offers early death benefits to help pay for expenses related to a terminal illness, disability, or long-term medical care. Most life insurance companies offer this rider free of charge to policyholders that are in good health.

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