Life insurance contracts sometimes contain provisions by which the death benefits can be paid out to an insured person while they are still alive. This is called “accelerating” the benefits.
Certain terms must be met for the benefits to be accelerated, and different policies have different contract language and exclusions. Sometimes these provisions are attached to a regular contract as a Rider, which might require an additional premium, or might be included by default.
Most major life insurance companies include Accelerated Death Benefit provisions or riders at no charge.
The triggering event for such benefits to be paid is typically a verifiable medical diagnosis of a terminal condition with less than 12 months of life expectancy. In some cases this can give the insured the means to get the best treatment money can buy and result in a prolonged life, but the benefits can generally be used for whatever the insured wants.
It is becoming more popular for insurers to include accelerated coverage for chronic conditions or coronary and cancer health issues that meet certain criteria but do not necessarily entail a very short life expectancy. The amount of death benefit than can be accelerated is usually capped around $250,000 or less, but some policies allow for larger amounts to be accelerated.
The remaining balance of death benefit will remain in the policy and will pay out upon the death of the insured (if it occurs while the policy is still in force). Policies are generally in force as long as premiums are paid and the term limits (length of time coverage is insured under a term policy) are not exhausted.
What Types of Life Insurance Exist?
What are Accelerated Benefits?