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What is an Accelerative Endowment?

What is an Accelerative Endowment?

Cash-value life policies can be structured for certain endowment ages, and dividends from the company can accelerate the endowment age. Traditional life insurance policies, especially older ones always had an “endowment age,” which meant that if the insured reached that age, their death benefit would be paid out in one lump sum, to be used however the insured wanted.

The endowment age used to be about 95 or 100 years old, but in the last few years most companies have moved the age of endowment back to about age 120, since people are living longer and longer, and it looked like they were going to be paying out too many contracts at endowment age instead of at time of death in the future.

Some policies, whether term or permanent, will allow the policyholder to accelerate the death benefit, and have it paid out while living, if they are diagnosed with chronic illness and 12 months to live, or specific other chronic conditions.

Most of these accelerated benefits are part of contract riders, whether paid or included with the policy, and usually cap the amount that can be accelerated at somewhere between $100,000-$250,000, and a few companies give the insured access to up to $500,000.

These “living benefits” riders are becoming more an more standard in the life insurance industry, and it sometimes requires the agent to be licensed for health insurance in addition to life insurance. The other kind of accelerative endowment is not very common anymore. Policies would be structured to pay out a specific amount at a certain age, such as when college started, at which point the life insurance policy would terminate.

These might also be structured for endowment payment at age 65, or a specific number of years. Companies that pay dividends or credit variable interest rates to life policies may also have endowment ages that can be accelerated forward if the policy earns more interest or dividends than originally projected.

Another kind of life policy that pays out a certain amount at a certain time is Return of Premium (ROP) term insurance, which pays a lump sum equal to premiums paid if the insured outlives the term period of the life insurance contract. These, also, are offered less today than they used to be, partially because insurers are having a hard time with low persistent low interest rates.

What is Accelerated Life Insurance?

Keywords: cash value life insurance, whole life insurance, endowment age, living benefits life insurance, accelerated death benefit, Return of Premium (ROP),