Most people buy life insurance as a way of providing their loved ones with financial protection, if they were to unexpectedly pass away. What you may not realize, though, is that certain life insurance policies can also offer benefits to the policyholder… while they’re still alive.

Today, let’s chat a bit about what accelerated life insurance benefits are, what they offer, and how to add them to your next policy.

What Are Accelerated Death Benefits?

The primary goal of life insurance is to provide a death benefit to your beneficiaries if you die. However, many life insurance carriers today also offer “living benefits” on certain policies, also known as accelerated death benefits.

With an accelerated death benefit, you (the policyholder) are able to access a portion of your policy’s death benefit prior to your death, as long as you meet certain requirements. These funds can be used to cover household expenses, medical bills, or to simply enjoy time with your family.

Some carriers may allow you to withdraw nearly all of your policy’s benefit (often up to 90%), while others may limit you to a smaller percentage (commonly 40-50%) up to a maximum dollar amount. This means that if you have a policy with a death benefit of $400,000, and are allowed up to 75% in living benefits, you may be able to withdraw as much as $300,000 from your policy.

Any accelerated death benefits that you use will be deducted from your policy’s value. If you withdraw 75% of a $400,000 policy, for instance, your beneficiaries will only receive $100,000 (the remaining 25%) when you pass away.

When Do Accelerated Death Benefits Kick In?

As the name implies, accelerated death benefits (or living benefits) are provided to policyholders in advance of their death. They are typically offered if you are diagnosed with a:

  • Terminal illness
  • Chronic illness
  • Long-term disability
  • Other health concern or condition that requires qualifying long-term care

Those diagnosed with a terminal illness, such as cancer, may also need to meet prognosis guidelines in order to qualify for accelerated benefits. For example, your carrier may only allow for a living benefits withdrawal if you are given less than 12 or 24 months to live.

Some carriers may only offer accelerated benefits for terminal diagnoses, while others may offer living benefits for a range of conditions. Be sure to read your policy and rider terms to see what you are eligible for and how much you can withdraw.

How to Add Accelerated Death Benefits to a Life Insurance Policy

Typically, accelerated death benefits are added to a life insurance policy when the policy is first purchased. Some carriers may include them on certain policies at no extra cost, while others might offer them as an optional rider for an additional charge.

You may also be able to add living benefits to a policy if you are converting term coverage into permanent life insurance, or when you renew a term policy that is expiring.

Living benefits help ensure that your life insurance policy not only protects your loved ones when you’re gone, but can also benefit you while you’re still alive. If you’re interested in learning more about the riders available to you and how they can benefit your whole family (before and after your death), be sure to ask an agent for more information.

Wondering which life insurance coverage options are right for you? LeapLife can help guide you.

Our platform can match you with personalized coverage of up to $5 million for your loved ones, through one of our trusted A-rated (or higher) life insurance partners. Our agents are available by phone if you have questions or need help building the individual coverage that works best.