Accelerated Death Benefit

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What is an accelerated death benefit? If you should become seriously ill you may accumulate some very large medical expenses. Some life insurance companies have made it possible to collect an accelerated death benefit during your lifetime if such a condition should arise. What these companies are doing is allowing the insured to collect part of their death benefits before they die.

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These benefits are paid under certain conditions, like the onset of a medically incapacitating condition, the diagnosis of a terminal illness, the need for long-term care or confinement to a nursing home.

This idea is fairly new and approximately 200 life insurance companies offer this benefit, but, as with any new product there are many variations in design.

Some insurance companies offer the benefit as part of a policy, with the additional charge built into the death benefit cost. Others make the benefit a rider, also for an additional charge.

Accelerated payments made to the beneficiary can be made in monthly installments or in a lump sum, depending on the company.

Upon the death of the recipient, or policy owner, the balance due goes to the beneficiary.

At the time of deciding whether or not to take an accelerated death benefit from your policy careful consideration should be given as to whether or not the balance is sufficient to fulfill the needs of your loved ones, like your final expenses.

Another consideration to give your attention is the effect these benefits will have on Medicaid. The receipt of these payments may be considered income and might affect Medicaid eligibility.

The tax implications should also be given ample consideration. It is, at this time, unknown whether these accelerated death benefit payments will be taxable or not. Bear in mind that life insurance proceeds are usually exempt from tax by the Federal Government.

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