If you have life insurance, your policy might include accelerated benefits. Whether you have a term or whole life policy, this benefit provides an exception to the rule of obtaining your proceeds after your death. The accelerated death benefit comes into play when the individual named on the policy becomes chronically or terminally ill.
Also known as living benefits, accelerated death benefits make it possible for the insured individual to obtain a portion of the coverage to use for necessary expenses while seriously ill. Since this option isn't automatically included in all policies as a standard feature, you need to ask your insurance agent whether or not you have it. If you did not request for its inclusion at the time you obtained the policy, it is possible that you don't have it. You should be able to add it to an existing policy as a special rider at any time with the additional costs included with your insurance premium.
Your insurer maintains a list of medical conditions that qualify an individual to receive the accelerated death benefit. A simple phone call or email should get you the information you need to determine whether or not you qualify for this special option. Most likely, you'll need to provide documented proof to the insurance company before you can collect any money.
Each insurer offering this type of exception has a specific list of medical conditions that qualify. In general, the illness must be one that is life threatening or permanently debilitating. Medical issues that typically qualify include:
Generally, accelerated benefits can range from 25 to 95 percent of the death benefit. The payment depends on your policy's face value, the terms of your contract, and the state you live in. The amount of your benefit will also be reduced by any outstanding loans against your policy in addition to a possible small service fee.
Ask your insurer to provide you with a quote before you exercise your accelerated death benefit claim. In addition, some states may limit the percentage and amount that can be accelerated. Check with your state insurance department. Regarding how payments are distributed, your policy or rider will specify.
Sometimes payments are made monthly; others are paid in a lump sum. Some policies allow you to choose the method of payment. Fortunately, in most cases you do not have to pay any federal tax on this money, so you should have access to the entire sum that you receive.
Once you die, your beneficiaries can only collect the remaining funds held in your policy. If you have already collected the full balance, your beneficiaries won't receive anything.
If you've been diagnosed with a life-threatening disease, you might be able to secure funds from your life insurance policy if it includes the accelerated death benefit option. Certain rules apply to this type of benefit, and you should check with your insurance agent to determine whether or not you qualify to receive them if or when you've been diagnosed with a serious medical condition.