Terminal illness! How many times a day is a person told, or a family told that a person only has months to live? Often this news comes after a stroke that requires extensive medical care in ICU, or after a long battle with cancer. Medical bills pile up and, because the person is usually no longer able to work, the family is short of money due to the lack of income. There isn’t any part of terminal illness that cuts a family slack.
Several years ago life insurance companies started adding an accelerated death benefit to life insurance policies. This was in response to a practice that began early in the AIDS epidemic. The epidemic spawned a business of “helping” the victims out by offering to purchase their life insurance policy for a reduced amount. This gave them the cash they needed to keep up with medical bills and continue treatment. These helpful business people would usually offer one half of the death benefit in cash in return for ownership of the person’s policy. The business idea was of course that upon that person’s death, the full death benefit was collected and the profit was taken.
The downside to this of course is that it robbed many families of the full amount of life insurance that the person had been paying for all those years. The bills might have been paid, but there wasn’t anything left over to help the family move on.
With the accelerated death benefit the insurance company offers the same relief from the bills, often allowing someone to take as much as half of the death benefit when they find out they are terminally ill. The difference is that the policy stays intact and upon the death of the individual, the balance of the policy is paid to the beneficiary.
Check your life insurance policy and make sure your policy has this rider. If you’re not sure, enlist the help of an independent agent to review it. It may be possible to get the rider added to your policy, and if not, it may be prudent to replace your current policy with a new policy that has the benefit available.
This post is somewhat dated. Life insurance underwriting is changing and evolving continually. For more updated information check out some of the key word links. If you have a specific question or topic you need information for do a search. If you don’t find the answers you need contact me and we’ll make sure you get the information that is important to you.