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Family Issues: Use of Accelerated Death Benefits

The planning issues relating to a terminally ill family member must be handled with great care and sensitivity. Despite these difficulties, it is possible to take steps to accommodate the wishes of the patient in an economically viable manner.

Case in point: A life insurance policy may provide accelerated death benefits in the form of a lump-sum payment or monthly payments that are deducted from the policy's face value. Sometimes this feature is in the form of a rider to the policy.

What types of events will trigger a payout of benefits? While the exact definition differs from policy to policy, some of the catastrophic types of illnesses or diseases that may be covered include heart attacks, strokes, bypass surgery, heart or liver transplant surgery, life-threatening cancer and kidney failure.

Does the life insurance policy remain in effect if a living benefit claim is made? Yes, but there is a proportionate decrease in the death benefit and the cash value of the policy (as well as in the premiums). Note: For some insurance policies, it may be possible to receive pre-death payments if the insured person requires home convalescent or nursing facility care.

Naturally, the age of the insured will have an impact on the cost of the premiums. Some of the factors to consider with this provision are:

*The length of the waiting period between the time the policy is issued and when coverage begins.

*The waiting period between the time the illness is diagnosed and the time when actual payments begin.

*The specific types of illnesses covered under the policy.

*Any limitations on the use of benefits.

*Any requirement that a terminal illness is diagnosed before claims will be accepted.

*The cost of the premiums.

The income received from an accelerated death benefit is not subject to federal income tax. In some states, payments are also exempt from state income tax.

Last, but not least: You can find out more information about accelerated death benefits from a qualified life insurance professional

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	[ return to list ] Family Issues: Use of Accelerated Death Benefits The planning issues relating to a terminally ill family member must be handled with great care and sensitivity. Despite these difficulties, it is possible to take steps to accommodate the wishes of the patient in an economically viable manner. Case in point: A life insurance policy may provide accelerated death benefits in the form of a lump-sum payment or monthly payments that are deducted from the policy's face value. Sometimes this feature is in the form of a rider to the policy. What types of events will trigger a payout of benefits? While the exact definition differs from policy to policy, some of the catastrophic types of illnesses or diseases that may be covered include heart attacks, strokes, bypass surgery, heart or liver transplant surgery, life-threatening cancer and kidney failure. Does the life insurance policy remain in effect if a living benefit claim is made? Yes, but there is a proportionate decrease in the death benefit and the cash value of the policy (as well as in the premiums). Note: For some insurance policies, it may be possible to receive pre-death payments if the insured person requires home convalescent or nursing facility care. Naturally, the age of the insured will have an impact on the cost of the premiums. Some of the factors to consider with this provision are: The length of the waiting period between the time the policy is issued and when coverage begins. The waiting period between the time the illness is diagnosed and the time when actual payments begin. The specific types of illnesses covered under the policy. Any limitations on the use of benefits. Any requirement that a terminal illness is diagnosed before claims will be accepted. The cost of the premiums. The income received from an accelerated death benefit is not subject to federal income tax. In some states, payments are also exempt from state income tax. Last, but not least: You can find out more information about accelerated death benefits from a qualified life insurance professional [ return to list ]
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