The accelerated death benefit is one of those gold nuggets in life insurance policies that, for very little cost, can bring peace, sanity and hope in the life of someone terminally ill. The ADB is simply one of the nicest things the life insurance companies have ever done. When someone is terminally ill the companies know that they will soon be paying out the full death benefit. They recognize what a blessing and anxiety reliever it can be to have money available to keep financial burdens from adding to what can already be a very stressful time. That they charge some interest or an administrative fee is fair when you consider that this would be the worst, if not an impossible, time to borrow money.
It’s a great thing and a comfort when there is life insurance in place that will help the family deal with the financial part of the loss and get back on their feet. Quite often, especially with an extended terminal illness, medical bills pile up and the only hope is that the life insurance will come through to pay it. Now, with most new policies there is an automatically included rider that offers help when it is first needed, prior to the death. An accelerated death benefit rider will allow the owner to receive, in most cases, up to half of the death benefit once a person has been diagnosed as terminally ill. Terminally ill is generally defined as a prognosis of less than 12 months to live. Attached is a sample rider from an American General Life term insurance policy.
Often this benefit is used for staying current with medical bills and loss of income if the insured is no longer working, but the nice thing is that the insurance company doesn’t put any restrictions on how it’s used.
I’ve written more than once about what I think is the single most important reason a husband should have life insurance on a stay at home mom. Imagine the gift to the children if the husband had the money to take a one year sabbatical from work and be a stay at home Dad. I see one of the great uses the accelerated death benefit as making it possible for a spouse to take time off to stay at home and take care of a dying mate. That may sound a little morbid to some, but for anyone who has helped with hospice for a loved one, I can’t think of a greater gift to a dying spouse.
It might mean the money to move someplace more comfortable. It might mean an outrageous family vacation, a memory that will last forever especially for children, as that last great time they had with their mom or dad.
Bottom line. No matter how the accelerated benefit is used, it is a blessing that is built right into most life insurance policies. In the whole scheme of things it is a relatively new feature and you could have a policy too old to offer the feature. If you read through your policy and can’t find where it says the rider is included, you may want to consider applying for a new policy that does include it. The rider doesn’t cost anything so, with prices still declining in many instances, you may be able to add the benefit and lower your cost.