Life Insurance Accelerated Death Benefit Riders

life insurance accelerated death benefits

Many life insurance policies issued today include an Accelerated Death Benefit Rider . Under an Accelerated Death Benefit Rider, the carrier will pay part of the death benefit to a policy owner if the insured is proven to have an illness anticipated to result in the death of the insured within a specified time period. While the Internal Revenue code allows for life expectancies as long as 24 months, most carriers will trigger the rider only with a mortality period of less than 6 months. The amount of the life insurance death benefit available is determined by the company according to a predetermined formula or percentage of the policy face amount. In general the carriers work to keep their benefits tax free, but tax treatment and program requirements within a company by state.

Accelerated Death Benefits Rules and Requirements

  • Genworth Life and Annuity offers its Accelerated Death Benefit at no additional premium cost, but they do charge a 250 dollar fee and interest if they pay out the benefit. They will allow a single request, and will pay out in a lump sum to the policy owner. Genworth will loan the policy owner up to 75 % of the policy’s face amount less any outstanding loans against the policy. They cap their Accelerated Death Benefit at 500,000 dollars regardless of the policy size. If the policy has any irrevocable beneficiaries, they would need to sign off on allowing their policy benefits to be used for the sake of the insured.
  • Banner Life has an accelerated death benefit of up to 75% up to $500,000 and a $100 fee.
  • ING Reliastar has a benefit up to 50% up to $250,000 and a $300 dollar fee, but they set the time to mortality at 12 months.
  • Lincoln Benefit will pay out up to 80% to a limit of $250,000 if a physician certifies that you have a terminal illness with a life expectancy of less than 12 months. They will pay in up to 3 installments, and charge a 150 dollar fee for each disbursement. /li>

Long Term Care or Skilled Nursing Benefits under an Accelerated Death Benefit
Some companies also have confinement, LTC or skilled nursing options within their accelerated death benefit programs. With these policies, the trigger is not a diagnosis of terminal illness, but rather a diagnosis of permanent confinement to a skilled nursing facility. Lincoln Benefit has a confinement option which will pay out the ADB if the insured is fully disabled, confined to a skilled nursing facility for at least a year, and likely to remain confined for the remainder of his/her life. North American (Nacolah) will pay up to 1 million dollars in long term care costs once you’ve been confined more than 3 months and been certified as unlikely to overcome your full disability in your lifetime.

For a young middle aged family with an upper middle class networth, we can often structure a program using a finite payment plan on a No Lapse Guaranteed Universal Life policy to guarantee both disaster management coverage while the couple is younger, and a guaranteed pool of long term care funding for their final years.

It is generally prudent to consult with a tax attorney and medicaid planning expert before taking an accelerated death benefit disbursement. Even just owning a policy with an accelerated benefit product might affect your eligibility for these programs. In addition, exercising the option to accelerate death benefits and receiving those benefits before you apply for these programs, or while you are receiving government aid, might affect your initial or continued eligibility. You should always check with the Medicaid Unit of your local Division of Medical Assistance and the Social Security Administration.

An accelerated death benefit is not a long-term care policy or nursing home insurance policy. The amount paid out isn’t guaranteed to cover medical, nursing home or
other bills. The money you receive can be used for any purpose, and is not earmarked for actual patient care. Unlike conventional life insurance proceeds, accelerated benefits might be taxable.


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