Most life insurance companies include a rider on their term life policies that allows the payment of a portion of the policy death benefit to be paid to the policy beneficiary(s) in the event the primary insured is diagnosed as terminally ill by a practicing, licensed physician. This rider is usually called an Accelerated Death Benefit Rider or Living Benefit Rider. The rider is almost always included at no additional cost and is subject to state availability.
Each life insurance company has guidelines regarding the specific requirements of the rider. The chart below shows some of these guidelines and the general range across companies.
| Life Expectancy | Amount Allowed | Maximum Amount |
Range | 6 - 12 Months | 25% - 75% | $250K - $500K |
The life expectancy is the amount of time the licensed physician expects the primary insured to live. The amount allowed is the percentage of the policy face amount the insurance company will 'accelerate' or pay out. The maximum amount is simply the most the company will pay under the rider.
It is important to note the amount accelerated is treated like a policy loan, and is deducted from the face amount of the policy along with any accrued interest and administrative fees.
The Accelerated Death Benefit rider can be a valuable feature should you become terminally ill during the term of your life insurance policy. Proceeds can be used to pay related medical expenses, to prepay funeral expenses or to settle any other outstanding issues prior to an anticipated death. Of course, you may never choose to use the rider, which may be the best scenario of all!
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