Acceleration Life Insurance Details

Life insurance serves as a reassuring purchase for the clients. Some people are the primary providers of their family and know that their unexpected death would heavily affect their loved ones' lives, so they acquire life insurance. Life insurance pays off final costs, pays off debt, takes care of federal and state taxes, etc. Life insurance is taken out as a precaution since no one can know for sure how long they'll live. But for some people, unfortunately, they do know how much time they have left.

Accelerated life insurance, also known as accelerated benefits or living benefits, allows the policyholder to receive their life insurance benefits before death. This policy is exclusive to terminally ill patients and has a life expectancy of 6 months to 2 years. Also, patients who require permanent nursing home confinement or have been incapacitated due to a medical condition fit the criteria. Each insurance company differs on how much "death benefit" is paid to the client and how close to their deaths they must be eligible to receive the payment. Between 25%-100% of death benefits are paid depending on the specific situation and the insurance company.

Example of Accelerated Life Insurance

Suppose a man with a $1 million life insurance policy was diagnosed with terminal prostate cancer. In that case, he'd have the choice to accelerate his benefits (given that the insurance contract has that policy, to begin with). The insurance first analyzes the situation and conditions to offer a sum.

Depending on the insurance, the amount will differ. But this time, the insurance offers $300,000 to the man. Should the man accept the sum amount offered, his death benefits will decrease the same amount that the company accelerated, $300,000 decrease. Prostate cancer usually falls into the critical illness section, which is most of the total sum, if not all, will be given to him in one payment.

Types of Accelerated Life insurance

Some accelerated benefits are initially a part of the insurance plan, while others come at an extra cost. People who are eligible for accelerated life insurance are called "riders" by insurance companies. Three main situations affect the process of receiving accelerated death benefits: Critical illness riders, chronic illness riders, and long-term care riders.

A person in critical condition diagnosed with a significant illness or has suffered fatal injuries gets paid a large portion of their benefits in one big payment. Chronic illness riders get more periodic payments over time. Those eligible to receive such payments are the patients who cannot perform two of the six daily living activities: bathing, continence, dressing, eating, toileting, and transferring. Having a permanent severe cognitive impairment requiring substantial supervision also places a person under chronic illness riders.

Lastly, long-term care riders are relatively similar to chronic illness riders, but the cost is higher. The main difference is that the chronic illness rider is permanently incapacitated. Chronic illness riders also payout in a lump sum or annually; on the other hand, long-term care riders usually have a monthly payout.