Understanding Accelerated Benefits
Accelerated benefits, often referred to as "living benefits," are a clause in certain life insurance policies allowing the policyholder to receive their benefits before death. This provision typically comes into play under critical conditions such as terminal illness, long-term high-cost illness, permanent nursing home confinement, or a medically incapacitating condition. The utilization of this clause can offer a lifeline in managing medical costs and maintaining quality of life during challenging times.
Inclusion of Accelerated Benefits in Insurance Policies
Many life insurance policies incorporate accelerated benefits as part of the contract, providing an added layer of security for the insured. However, in cases where these benefits are not initially included, they can often be added as riders, which are amendments to the insurance contract that stipulate additional provisions. The added riders come with an additional fee and may have specific names such as Chronic Illness Rider, Terminal Illness Rider, or Extended Care Rider, reflecting the conditions under which they can be invoked.
Conditions for Invoking Accelerated Benefits
Accelerated benefits can be accessed if certain conditions are met. These conditions could range from a diagnosis of a life-threatening health condition, expected life expectancy of less than 12 months, or the need for long-term care. Different insurance companies may have variable criteria for accessing these benefits and could offer between 25 to 100 percent of the death benefit as an early payment. Once benefits are accelerated, the amount accessed is deducted from the remaining death benefit.
The Significance of Accelerated Benefits
Choosing a policy with accelerated benefits can significantly impact a policyholder's quality of life during trying times. They enable policyholders to cover their daily living expenses, mitigate the financial burden of medical costs, and ensure their loved ones' security after their passing. Accelerated benefits were first introduced in the late 1980s with the goal of easing the financial strain for those diagnosed with critical illnesses, such as AIDS.
Qualifying for Accelerated Benefits
It is crucial to understand the conditions that qualify one for accelerated benefits. Typically, contracting a terminal illness with a life expectancy of 6 months to 2 years, requiring an organ transplant due to illness, or requiring long-term hospice care can qualify one for these benefits. In addition, needing assistance with everyday activities due to medical incapacitation could also be a qualifying factor.
Cost Considerations for Accelerated Benefits
The cost of including accelerated benefits in a life insurance policy can vary. If the coverage is already included in the policy, the cost will be integrated into the policy's overall price. However, if the benefit is added as a rider, an additional fee or a percentage of the death benefit might apply.
While life insurance provides a financial safety net after one's passing, accelerated benefits provide a critical lifeline during a policyholder's lifetime under certain dire circumstances. By understanding this provision, individuals can make informed decisions when purchasing life insurance and securing their and their loved ones' financial future.
Summary
Some life insurance policies allow for death benefits to be accelerated as living benefits under certain conditions.
Accelerated benefits are often included in life insurance contracts, but it is possible that they can also be added as Riders for an additional fee. Riders are addendum to a contract that contain additional contractual provisions.
What an accelerated benefits rider stipulates is that if certain conditions are met, a portion of the death benefits on a life insurance policy can be paid to the insured person during their lifetime. These conditions may be that the insured person has been diagnosed with less than 12 months to live, or that they have another serious health condition which is covered. Sometimes this includes the payment of monthly benefits if a person requires long-term care.
Typically only a specified percentage or amount of the death benefit can be accelerated under these riders.
The remaining balance will be paid out when the insured dies under the original provisions of the life insurance contract. These riders may have names such as Chronic Illness Rider, Terminal Illness Rider, Extended Care Rider, and so on.
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