Life Insurance Policies Offer Different Features
Most only pay out a benefit upon the insured’s death, but policies with an accelerated death benefit rider are becoming more popular. While it is wise to invest in a policy that gives you the option of receiving part of the death benefit while you are still alive, it’s important to know exactly how these plans work so you can make an informed decision.
Accelerated Death Benefit :: Designed for Illness
Early death benefits can be received only when certain criteria are met. Typically, there must be a chronic or terminal illness, and the insured should have a life expectancy of less than 24 months. Acute illnesses that drastically shorten life spans, like AIDS and acute heart disease, can also qualify you for the early benefit. You can also request payment if you are permanently confined to a nursing home, or if you have need long-term care and are moving into a nursing home or skilled care facility.
Dollar for Dollar Deduction
The accelerated death benefit reduces the amount of your beneficiaries payment after your death. Some policies only allow you to take a portion of the total insurance amount as an accelerated benefit. The balance that remains is what your family will receive. Most plans allow you to claim between 25 and 95 percent of the death benefits early.
Consider the Consequences
When you claim early benefits, there are financial ramifications. Your family will have a reduced benefit upon your death, and it’s important to make sure that they will still receive enough to take care of their financial needs. It counts as income, so it can also affect your Medicaid eligibility.
Paying for Benefits
This feature does not come with all policies. Most companies offer it as a rider that is added to a policy. You may have to pay a little extra for the option, although some companies only charge you if you actually take advantage of the feature.
When you invest in a life insurance policy, consider one with accelerated death benefit. Having the option to receive part of the benefit while you are still alive is valuable. It can help pay for medical bills and ease the financial burden in the final years of your life if you have a terminal illness. However, it is also important to be sure that your family will still have the benefits they need to handle their financial needs after your death.
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