Accelerated Options Details

Accelerated options are a savior in the insurance industry; one can opt-out of the policy with a significant amount of the capital invested provided they meet the insurance company's provisions set out in the contract. These provisions might include evidence of terminal illness, a partial amount of cash to be withdrawn, proof of financial difficulty, or inability to pay premiums.

These options are beneficial but carry a charge that is a percentage of the capital invested. The cost is added when the contract is signed or when the contract is in effect. If the policyholder uses the accelerated benefits, there is an additional premium charged. Whatever amount is withdrawn using these options is deducted from the total capital plus the option charge unless the insured can withdraw all the capital in special cases.

Example of Accelerated Options

For example, a company might require a life insurance policyholder to be near death or be ailing to access the accelerated option. Accelerated options help terminally ill people access funds and use them to pay hospital bills or provide for their families while they cannot work. The life insurance company then deducts the accelerated benefits from the full policy of the insured.

If the insured uses accelerated options to withdraw a quarter of the benefits, their policy also reduces by the same amount. This shows how expensive these options are; the withdrawn amount gets deducted from your total benefits, together with the service charge and an additional percentage due to the use of accelerated options.

On some special occasions, the insured can be allowed to withdraw up to 100% of their policy. Suppose the policyholder owns a whole life insurance policy. In that case, the accelerated options help them pay out the remainder of the premiums in a single lump sum using the savings already in the policy so that they can redeem the policy fully.

History of Accelerated Options

Accelerated options cater to the policyholders' needs; it allows them to redeem their insurance benefits before due time because of unforeseen circumstances. These include ailments, economic difficulties, or migration to different countries.

One can use accrued benefits to their benefit even though there is an additional charge for early withdrawal. Furthermore, when ill, you do not have to wait till death for your benefits to be transferred to your next of kin; you can use your benefits early to pay bills. Also, since life insurance accrues interest over time, one can get out of the policy using accelerated options if the interests are large enough to cover the fee charged for early withdrawal.

Economic uncertainties might play out negatively in the future, making life difficult. The policyholder would have to redeem their insurance before the due date hence making use of accelerated options. Insurance companies saw this in the 2007/2008 financial crisis when most people lost their incomes and had to redeem their insurance earlier than expected to meet their financial obligations.