ACCELERATED DEATH BENEFIT
Back to GlossaryDefinition
A reduced payment of the death benefit of a life insurance policy paid to the insured during the insured’s lifetime in return for a surrender of the life insurance contract.
Summary
An Accelerated Death Benefit is essentially a 'living benefit' that allows terminally or chronically ill policyholders to access a portion of their life insurance death benefit while they're still alive. Instead of waiting for death to trigger the full payout to beneficiaries, the insured person can receive a reduced amount (typically 25-95% of the death benefit) to help cover medical expenses, long-term care, or other financial needs during their illness. The policy is then surrendered or the remaining death benefit is reduced accordingly.
Usage Context
This term is crucial when studying life insurance products, policy riders and benefits, estate planning considerations, and how insurance can provide financial assistance during medical crises. Understanding this concept is important for insurance professionals advising clients on policy options and for consumers making informed decisions about life insurance coverage.
Common Confusions
- Thinking the full death benefit is paid out (it's actually reduced)
- Confusing this with borrowing against the policy's cash value
- Believing any illness qualifies (typically requires terminal or chronic conditions)
- Assuming beneficiaries still receive the original death benefit amount
- Mixing up with viatical settlements (which involve selling to third parties)
