Life insurance contracts can include clauses or add-ons called riders, which provide additional or supplementary benefit(s) for the policyholder. One such rider which can be added to a life insurance contract is called an Accelerated Death Benefit. Accelerated death benefit riders may carry an extra cost, or may come as a rider that does not require additional premium.
Under certain health conditions, an accelerated death benefit provision allows the policy owner to receive part of the death benefit before the insured actually dies. This money can be used to help with extra expenses or to create memories during the lifetime of a person with chronic, critical, or terminal health issues.
With most life insurance companies, the Accelerated Death Benefit can be added to a life insurance contract without having to increase the premiums paid for the policy. However, insurance companies do charge a flat fee to access accelerated death benefits. Moreover, the IRS can assess taxes on accelerated death benefits, especially if those funds exceed the allowance of per day benefits for long-term care.
Fortunately, there are no restrictions on how the accelerated death benefit funds are spent. The funds can be used as the policy owner sees fit. Even so, the premium for the minimum base death benefit, plus any paid riders, must be maintained after accelerated benefits are paid out, otherwise, the policy could lapse and create a tax liability when the payout exceeds the total premiums paid.
Accelerated death benefits are added to a life insurance contract to act as a financial safety net. They may be used to assist in mitigating the financial impact of catastrophic medical events in the insured’s lifetime. As medical costs have risen, medical expenses have become the number one reason for bankruptcy. Today over 6 of every 10 bankruptcies are due to medical expenses. The use of accelerated death benefit riders could significantly lessen this unfortunate statistic.
Accelerated death benefits can lessen the financial stress of those who face catastrophic expenses due to medical conditions. Health insurance may pay for some or all of the doctor and hospital bills but living expenses and transportation costs could still be crippling financially. An accelerated death benefit can fill in where health insurance can’t. Disability insurance isn’t readily available for those over 65 but accelerated death benefits are, and they typically are accessible through age 110. This makes accelerated death benefits more consistent and reliable for those who may need to tap into those funds for a future critical, chronic, or terminal illness.
Purchasing whole life insurance with terminal, chronic and critical illness accelerated death benefit riders provides an immense amount of security. Fortunately, the sooner this type of life insurance is purchased the lower the cost, making accelerated death benefit riders attached to a guaranteed whole life policy, one of the best-guaranteed values available in the financial world today. At McFie Insurancewe specialize in designing permanent whole life insurance which almost always includes a rider for Accelerated Death Benefits. Schedule a strategy session to talk with our team, or call today at 702-660-7000.