Florida Health Insurance Terms:
"Accelerated Death Benefit"

Accelerated Death Benefit: This benefit is included with many policies today. It provides for the payment of a portion of the death benefit prior to the insured's death should the insured be diagnosed as terminally ill. The specific requirements vary by company.

If you were terminally ill, where would you turn for money? Some life insurance companies allow you to receive money from your policy if you become terminally ill in the form of accelerated death benefits, which give you either a lump sum payment or a monthly payment that is deducted from the policy's face value. The following occurrences could trigger an accelerated death benefit:

  • Diagnosis of a terminal illness or physical condition for which death is likely to occur within a specified amount of time.
  • Occurrence of one of a number of specified medical conditions ("dread diseases" or catastrophic illnesses) that would result in a drastically limited life span without extensive or extraordinary medical treatment.
  • The need for extended long term care in a nursing facility, at home, or in the community due to an inability to perform daily activities, including one or more of the following: eating, toileting, transferring, bathing, dressing, and continence.
  • Permanent confinement to a nursing home.
  • Accelerating death benefits began in 1988 as a way of giving terminally ill AIDS patients a portion of their life insurance proceeds. It has since expanded to include other terminal and chronic illnesses, and became the impetus for the now flourishing viatical industry. The income from an accelerated death benefit is not subject to federal income tax, and in some states, is not subject to state income tax.

Most companies require that your life expectancy be 12 months or less from the time you apply for accelerated death benefits. Most policies specify that you must have a "dread disease" such as a heart attack, life-threatening cancer, stroke, coronary artery bypass surgery, or kidney failure. A few companies include a major organ transplant, AIDS, paraplegia, and the loss of a limb or eyesight.

Some policies charge you a higher premium for the option of accelerating your death benefit. However, there are others that charge only if the benefit is accelerated, or do not charge at all. Insurers may either reduce the amount advanced to you, reflecting the loss interest on that money for the company, or treat the monetary advances as liens against the policy, charging interest on the amount advanced.

Most life insurance companies limit the amount of your death benefit you can accelerate, either by restricting the percentage of the death benefit or the dollar amount that you receive. Ordinarily, lump sum distributions are offered, unless state laws restrict such transactions, in which case you will be offered monthly payments.

Many companies allow you to add an accelerated death benefit rider at any time, while some include the rider when you purchase the policy. It can be added at any time. If you're wondering whether or not your individual or group policy contains an accelerated death benefit, contact your agent or insurance company.

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