An option within life insurance that allows the policyholder to access some of the accumulated dividends before their death.
Accelerative Endowment Details
In life insurance, an acceleration endowment is an option that grants clients the choice to transform their life insurance policy into an endowment policy. Life insurance usually doesn't grant access to its contributions and investments until the policyholder is deceased. But in the case of a client with a life-threatening condition, they can activate an acceleration endowment. Once activated, the underwriters who work for the insurance company start analyzing the claim and decide on a sum amount that the policyholder will receive. This amount doesn't affect the total amount that the beneficiaries will receive once the policyholder passes away. In other words, the security the beneficiary is supposed to receive isn't affected whatsoever, and the payout of the endowment comes from dividends accumulated over time.
Accelerative endowments do not occur unless an insurance policyholder finds themselves unexpectedly terminally ill. In most cases, such a condition comes to those of a much more mature age. If a 28-year-old is diagnosed with a terminal condition, an endowment is a little less likely to be accepted. An insurance company assumes a greater chance of prolonged life and even recovery with a young person. They do take into account the severity of the illness, of course. Realistically, someone who's 65+ is more likely to receive the endowment from their insurance companies.
If the insurance company accepts the claim, the policyholder receives the endowment as a lump sum. They can use the money they receive in any way they want. Most often, the holder purchases an annuity policy or another alternative investment that eventually generates more income. The main reason why most people take out an acceleration endowment is to generate more cash value through investments. Since the beneficiaries still receive the benefit in full despite the endowment, it creates an opportunity for policyholders to bring more resources for current affairs, like any medical bills, for example, or to leave to beneficiaries.
Example of an Accelerative Endowment
Let's say a 76-year-old man suddenly suffers a stroke, and someone takes him to the hospital. After regaining consciousness, he discovers that the cause of the stroke is a terminal heart disease. The doctor says the disease gives him a life expectancy of no more than one or two years, depending on how he takes care of himself from now on.
The man decides to claim an acceleration endowment from his life insurance to generate as much income as possible while he is still alive. His life insurance, which he pays almost $4,000 a year for, is worth $500,000. After reviewing the claim, his insurance accepts and agrees to pay him a calculated amount. With that money, he makes investments and some purchases. About two years later, the man passes away. In this case, his wife, who is the beneficiary, receives the full amount of $500,000 and can withdraw the investments that the man-made with his accelerative endowment.