Having life insurance means that those you love and care about may not have to suffer financial hardship at an already difficult time in their lives. That is because the proceeds from a life insurance policy can be used for a wide variety of different needs, such as the payoff of debt, the continuation of ongoing living expenses, and even to ensure that a child or a grandchild will have the money that they need to attend college in the future.
But, just as with most other products and services that you purchase, not all life insurance coverage is the same – and because of that, it may be necessary to add additional benefits to the policy to better fit the coverage to your needs. One way to do that is by adding various riders.
Why “Customizing” Your Life Insurance Coverage is Important
When it comes to life insurance policies, there isn’t a one-size-fits-all solution. So, sometimes it is necessary to add some additional protection to a plan – particularly because most standard life insurance contracts leave very little room for modification.
In some cases, the rider (or riders) that are added can allow the insured to make use of certain benefits while he or she is still living. This can make the life insurance policy much more flexible. One way to do so is to add an accelerated death benefit rider.
What is an Accelerated Death Benefit Rider?
An accelerated death benefit rider – also oftentimes referred to as a living benefits rider – can be added to a life insurance policy so that the insured may receive cash advances against the death benefit proceeds while he or she is still living. This can allow the insured to pay medical expenses or other costs that are typically due to a terminal illness and/or the confinement in a nursing home facility.
Accelerated death benefits are a relatively new option in the life insurance niche. Therefore, if you own a policy that you have had for some years, it is likely that the policy will not include this type of benefit rider.
How Does the Accelerated Death Benefit Rider Work?
If the insured on a life insurance policy is diagnosed with a terminal illness such as heart disease or stroke, or if he or she has been confined to a nursing home, they may be able to access a certain percentage (even up to 100%, depending on the plan) of the death benefit proceeds from the policy. In most cases, it may be required that the insured has been given a life expectancy of one year or less.
For anyone who is diagnosed with a terminal illness, having these living benefits can oftentimes mean the difference between living comfortably for the remainder of their life, or rather worrying about bills and unpaid debt.
While it is typically not required that the insured use the accessed funds from the insurance policy for paying medical and/or long-term care expenses, the money provide a way to reduce these debts. However, funds can often be used for any need that the policyholder sees fit.
It is required that the insured first satisfy a waiting period before he or she is able to access the funds. In addition, it is important to note that the amount of funds that are accessed through an accelerated death benefit rider will be charged against the amount of the death benefit that is eventually paid out to the beneficiary upon death. Should the insured recover from his or her illness, then it is not usually required that they repay the benefits that they received.
Also, when benefits are received via an accelerated death benefit rider, the money will not need to be reported as taxable income to the recipient. This is because living benefits, or accelerated death benefit proceeds, are considered to be tax exempt for those who are expected to pass away within two years.
It is important to note, however, that even though accelerated death benefits can provide a nice financial cushion if medical treatment and/or long-term care services are needed, it should not be considered as a substitute for medical and/or long-term care insurance coverage. Rather, these funds can and should be an added financial means.
It is also important to keep in mind that if you do generate a large lump sum of cash via an accelerated death benefit, it may change your financial status, which could, in turn, disqualify you from receiving Medicaid.
How Much Does an Accelerated Death Benefit Rider Cost?
The amount of an accelerated death benefit rider can differ, depending on the policy and the issuing insurance company, as well as on the age and health of the insured at the time of application for coverage.
Usually, accelerated death benefit riders may be included on permanent life insurance policies. However, there are some cases where this type of rider can also be purchased in conjunction with term life insurance coverage.
Should You Consider Adding an Accelerated Death Benefit Rider to Your Life Insurance Coverage?
Although the accelerated death benefit rider may not be a good fit for everyone, you may want to consider adding this rider to your life insurance if you have a long-life expectancy, and/or if certain types of terminal illnesses run in your family history.
It is important to note here that terminal illness is not the same thing as chronic illness. Therefore, be sure that you are moving forward with the proper type of coverage for the needs that you want to have covered. Working with an expert in the area of life insurance can better ensure that you’ll have all of your important questions answered before you move forward with the commitment of a life insurance plan.
How to Find Out More About Life Insurance and the Accelerated Death Benefit Rider
Prior to committing to a life insurance policy, it is always recommended that you know what is and is not covered. That way, you may be able to add various riders to the coverage in order to better fit your specific needs.
The best way to help yourself ensure that you get the lowest life insurance rates – as well as the best coverage concerning riders – is to work with an independent life insurance agency or brokerage. That way, you will be better able to compare the offerings from numerous different life insurance companies – as well as different quotes – and from there, you can determine which will work the best for you, your needs, and your budget.
If you’d like to find out more about life insurance and the accelerated death benefit rider, we can help. Our experts are available to answer any questions or concerns that you may have, as well as to provide you with details regarding how much this rider may cost to add to your policy.
In order to find out more, just simply take a moment to fill out the quote form on this page. So, contact us today – we’re here to help.