Life Insurance - What is the Accelerated Death Benefits Rider?
Did you know that an accelerated death benefit is using life insurance while you are still living? The accelerated death benefit is an option that allows you to utilize a portion of your death benefit during your lifetime as the insured. This option can be added to your life insurance policy as a rider. With most carriers, you can only access the funds from your death benefit if you are terminally ill and have 12 months or less to live.
There is usually no cost to add this rider to your policy, but there is usually a small fee to activate the coverage. If you want to activate the coverage, it is required that your physician certify to the life insurance company that you are terminally ill and have less than 12 months to live.
Depending on your individual life insurance carrier, you can be entitled to use anywhere from 25% to 100% of the death benefit for whatever you may need or want to do with the monies. Keep in mind that if you choose to exercise this rider, it would reduce the amount of death benefit your beneficiaries receive by the amount paid to you under the accelerated death benefit rider.
In most cases, the accelerated death benefit proceeds paid out would not be taxable. I would suggest you check with a tax adviser before withdrawing the money to be sure of any associated tax consequences.
About the author: Pam Fortier has been in the life insurance business for over 30 years. She also holds both a LUTCF designation and a CISR designation. Pam is adept at helping clients select the coverage they want at the price they can afford. You can contact Pam at 1-800-651-1953 or PFortier@Pivot.com.