You can’t plan for everything perfectly, but having specific riders attached to your life insurance policy can greatly boost the utility it has both during and after death. One of the more beneficial riders you can have attached to your policy is the accelerated death benefit rider, which aids the primary insured while they’re still alive.
What Is The Accelerated Death Benefit (ADB) Rider?
In short, if an insured has been legally declared terminally ill, with a time frame of 12-24 months or less, they will be granted access to a portion of the death benefit proceeds while they are still alive. It is also referred to as a living benefit rider.
The amount you’re granted access to largely depends on the carrier and the type of policy, but the most common amounts are 25% of the policy death benefit amount, with a minimum of $25,000 and a maximum of $250,000. Some are greater by both percentage and amount, and the trend is moving in this direction.The amount taken will be deducted from the final death benefit amount.
The best life insurance companies you can work with, if this rider is valuable to you, are the ones who automatically include it and those who don’t charge additional premium for it. Not all carriers offer it, but a vast majority do, with more than 150 insurers having it on hand.
Even if you are not terminally ill, under some circumstances, you may have limited access if you are in a position where you would require extensive medical care over a long period of time to stay alive. There are certain health conditions which are very treatable, yet deadly if they go untreated. The ADB rider can help to offset the high costs of care if necessary. This is not to say the rider should replace the valuable cancer policies, long term care policies or catastrophe policies available in the marketplace.
If, in a rare case, you were to recover and no longer be terminally ill, you wouldn’t be required to return the money. This can happen, for example, if an end-of-life patient opts for experimental treatments and it ends up saving their life. There have been cases reported where a person has some sort of inoperable tumor, rare cancer, or even a disease which little is known about with a high fatality rate, yet they’ve made a recovery and live a long life.
Instances where a false claim has been made may result in serious legal ramifications.
Things To Consider With This Rider
While it seems like a no brainer to take this benefit, there are situations where it could pose an threat to other types of benefits. Other medical or terminal types of insurance, namely Medicare/Medicaid or long term care insurance, could be affected. Benefits could be limited due to the immediate access to funds.
In the case of Medicaid, utilizing the rider could be viewed as current income, and Medicaid benefits could be throttled. Do understand that you are not required to use the living benefit rider, so understanding how it might affect Medicaid or other LTCi policies is crucial.
Opting to take the proceeds now as opposed to later could also impact what the intention of the policy was at its origination. If a life insurance policy was taken out for any specific purpose, it may be in the best interest for the insured to find other funding. Let’s say, for example, a business owner’s term life insurance policy had the rider. It wouldn’t be appropriate to take a large portion of the payout now if it were collateral for a loan.
In the opposite way, the availability of the accelerated death benefit rider might mean being able to avoid a viatical settlement, which would ultimately yield a lower total amount of benefit. In a viatical settlement, a portion, usually a state percentage, of the death benefit is paid immediately, but there is no residual amount. Upon death, the proceeds now pay in full to the purchaser of the settlement, not the normal primary beneficiary.
If you carry life insurance through your employer or union, you’ll want to check with your benefits administrator to see if this rider is made available through the insurance company they use. Members of the armed forces also have access through their government plans.