Accelerated Death Benefit Riders

Life insurance policies can have extra features known as riders, offering more benefits to the policyholder. One common rider is the Accelerated Death Benefit. This rider might cost extra, or it might be included without increasing the premium.

How Accelerated Death Benefits Work

If the policyholder gets seriously ill, this rider lets them get some of the policy’s payout early. This cash can help cover additional costs or support memorable experiences for someone dealing with severe or life-threatening health problems.

Adding an Accelerated Death Benefit to Your Policy

For many life insurance plans, you can add an Accelerated Death Benefit without raising your monthly payment. But, there’s usually a set fee to use this benefit early. Also, the IRS might tax this money, especially if it goes over the daily limit set for long-term care costs.

There’s good news: you’re free to use the money from the Accelerated Death Benefit however you need. But remember, you must keep paying for the basic policy and any other riders you’ve chosen, even after getting some of the death benefit early. If not, your policy could end, and you might owe taxes if the amount you got is more than what you’ve paid in premiums.

A Financial Backup for Health Emergencies

Adding an Accelerated Death Benefit to your life insurance is like having a financial backup for serious health problems. With healthcare costs going up, medical bills are a leading cause of bankruptcy. In fact, over 60% of bankruptcies are due to medical expenses. Using the Accelerated Death Benefit option could help reduce this risk.

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Types of Accelerated Death Benefit Riders

Terminal Illness Rider

This is a feature you can add to your insurance policy that lets you use some of the money that would be paid out after you die if you’re diagnosed with a terminal illness, meaning doctors think you have only 12 or 24 months left to live, depending on the state laws where your policy was made. Usually, you can only get a part of your total death benefit early, and there’s a maximum amount set.

For instance, if your policy is for $500,000, the terminal illness rider might let you access 90% of that, which is $450,000. But if your policy is for $2,000,000, you might not get 90% of it; there might be a cap, like $1,500,000, instead.

With permanent life insurance, like universal or whole life policies, the amount you can get early is often less, maybe up to 75% of your death benefit. This is because there’s a higher chance you might need to use this benefit with these types of policies.

Chronic Illness Rider

This is a type of benefit you can add to permanent life insurance plans. It lets you use some of the money from your policy earlier if you get really sick and can’t do two out of six basic activities you need for living on your own.

These activities include things like getting dressed, using the bathroom, moving from one place to another, controlling when you go to the bathroom, eating, taking a bath, or dealing with severe memory problems.

If you can’t do two of these things, you might be able to get part of your insurance money early because of chronic illness.

This option is helpful for people who need extra care for a long time, like in assisted living. It’s important to remember, though, that this isn’t the same as insurance specifically for long-term care. But, it can still help cover some costs if you need this kind of support.

Critical Illness Rider

This special option can be included in permanent life insurance plans. It allows you to get some of your insurance money early if you get very sick with serious conditions like a heart attack, stroke, needing an organ transplant, having severe kidney issues, facing aggressive cancer, and similar health challenges.

Usually, you can only access up to 25% of your total insurance payout early if you need it because of one of these critical illnesses.

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Benefits of Using an Accelerated Death Benefit

Accelerated death benefits can really help reduce money worries for people dealing with huge bills because of serious health issues. While health insurance might cover the cost of doctors and hospitals, other expenses like day-to-day living and getting around can still be a heavy financial burden. This is where an accelerated death benefit can step in to cover costs that health insurance doesn’t.

For people over 65, finding disability insurance can be tough, but accelerated death benefits are usually available up to age 110. This makes them a more dependable option for older individuals who might need to use the funds due to severe, ongoing, or life-ending illnesses in the future.

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Accelerated Death Benefits with McFie Insurance

Getting whole life insurance that includes options for early benefits in case of terminal, chronic, and critical illnesses offers a lot of peace of mind. The good news is, the earlier you buy this kind of life insurance, the less expensive it is. This makes life insurance with these special early benefit options one of the top secure investments you can find in the finance world today. At McFie Insurance, we focus on creating permanent whole life insurance plans that almost always come with an Accelerated Death Benefits rider. Consider scheduling a strategy session to talk with our team, or give us a call at 702-660-7000.

Dr. Tomas McFieDr. Tomas P. McFie

Most Americans depend on Social Security for retirement income. Even when people think they’re saving money, taxes, fees, investment losses and market volatility take most of their money away. Tom McFie is the founder of McFie Insurance which helps people keep more of the money they make, so they can have financial peace of mind. His latest book, A Biblical Guide to Personal Finance, can be purchased here. 

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