An accelerated death benefit rider (ADB) is an optional feature you can add to your life insurance policy that lets you withdraw from your death benefit if you have a terminal illness. This is a type of living benefits rider — which just means you can use the feature while you’re alive, as opposed to the proceeds your beneficiaries can claim after you die.
How does the accelerated death benefit work?
If you use the accelerated death benefit rider, you’ll receive a portion of the death benefit while you’re still living.
Some insurance companies will let you withdraw up to 50% of the death benefit or more, but other companies may limit the withdrawal to $250,000 or $500,000. The exact amount of money you can request varies for each insurer.
Most often, the money is used to cover medical expenses, but you can spend the money to cover whatever is most helpful to your situation.
How the money is distributed depends on your insurer — oftentimes, it’s distributed as a lump sum.
The remainder of your life insurance benefit still goes to your beneficiaries after you die. The death benefit isn’t taxable in most cases, nor is the money you collect from the accelerated death benefits rider.
All of Policygenius’ partner life insurance companies offer the accelerated death benefit rider for free. However, the rider may not be available in certain states. The life insurance agent you’re working with will be able to confirm if the ADB rider is available where you live.
Learn more: Do you have to die to collect life insurance?
What does the accelerated death benefit cover?
Once you receive the accelerated death benefit, you can use it however you want. Most people use the money for:
Medical expenses
Hospice
Nursing home
Private caretaker
As a life insurance agent advising thousands of clients, I always recommended people to include this rider on their policies. Adding the accelerated death benefit rider is a good decision because it’s free to add in most cases and optional to use if you’re ever diagnosed with a terminal illness.
Read more about life insurance riders
Who qualifies for an accelerated death benefit?
In most cases, if you have a certification from a doctor or medical professional stating you’re terminally ill and have a life expectancy of fewer than 12 to 24 months, you’ll qualify for the accelerated death benefit. This is assuming you have an active life insurance policy with that rider.
If you’re not terminally ill, you may still qualify for other accelerated benefits. Some insurance companies offer riders that will pay out a portion of the proceeds if you’re critically ill, chronically ill, or need long-term care.
You can work with your life insurance agent to review which riders your insurer offers, and the qualifications for each of the benefits.
Accelerated death benefit fees & restrictions
Accelerated death benefits come with some limitations.
Not all illnesses will qualify you to use the rider. Qualifying events that allow you to exercise the rider will be written in your insurance contract.
If you have permanent life insurance and take out a loan against your policy, the outstanding loan amount will be deducted from your benefit payout. For instance, if you request $100,000 and you have an outstanding loan of $25,000, you’ll only receive $75,000 of your accelerated death benefit.
Some life insurance companies charge a one-time processing fee of $150 (or a similar price point) to activate the accelerated death benefit rider and claim the money.
Other insurers treat the accelerated death benefit payment as a lien, which accrues interest. So when life insurances pay out the death benefit to your beneficiaries, they’ll deduct the amount you withdrew plus interest.
Frequently asked questions
Should you get an accelerated death benefit rider?
An accelerated death benefit rider is often a good choice because it adds protection if you’re diagnosed with a terminal illness, and you can often add it to your policy at no cost. The life insurance agent you’re working with will be able to confirm if this rider is available with the policy you’re purchasing.
How much does an accelerated death benefit cost?
Most often, the accelerated death benefit rider is included with your life insurance policy for free. If you use the feature to request money early, you won’t pay taxes on the funds, either.
When do insurers pay out an accelerated death benefit?
Generally, you’re able to use this rider if you’ve been diagnosed with a terminal illness and have less than two years to live. The exact provisions will be written out in your life insurance policy documents.
