What is an accelerated death benefit?

An accelerated death benefit (ADB) is a life insurance rider that pays out some of the death benefit while you’re alive if you are terminally ill.

Rebecca Shoenthal author photoHeadshot of Policygenius editor Nupur Gambhir

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Rebecca Shoenthal

Rebecca Shoenthal

Editor & Licensed Life Insurance Expert

Rebecca Shoenthal is a licensed life, disability, and health insurance expert and a former editor at Policygenius. Her insights about life insurance and finance have appeared in The Wall Street Journal, Fox Business, The Balance, HerMoney, SBLI, and John Hancock.

&Nupur Gambhir

Nupur Gambhir

Senior Editor & Licensed Life Insurance Expert

Nupur Gambhir is a licensed life, health, and disability insurance expert and a former senior editor at Policygenius. Her insurance expertise has been featured in Bloomberg News, Forbes Advisor, CNET, Fortune, Slate, Real Simple, Lifehacker, The Financial Gym, and the end-of-life planning service Cake.

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An accelerated death benefit rider (ADB) is a living benefits rider that lets you withdraw from the life insurance death benefit when you have a terminal illness. The accelerated death benefit rider is usually included in your policy at no extra cost to you.

This money can be used toward medical expenses or anything that would alleviate any financial burden during your final years. However, withdrawing from the death benefit payment early will reduce the amount of money your beneficiaries get from your policy after you die, which is why it can be financially prudent for you to use your own savings instead of withdrawing from the death benefit. 

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How does the accelerated death benefit work?

If you access life insurance money before you die using an accelerated death benefit rider, you receive a portion of the death benefit to pay for medical care, hospice, or anything else you may need. Some will let you withdraw up to 50% of the death benefit, but the exact amount you can take from the death benefit varies for each insurer. The remainder of your life insurance benefit still goes to your beneficiaries after you die. Any money you collect from the accelerated death benefits rider is not subject to federal income tax.

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

Accelerated death benefit fees and restrictions

Accelerated death benefits come with some limitations. For example, if you have permanent life insurance and take out a loan against your policy, your accelerated benefit will be paid to you minus any outstanding loan amount. Additionally, not all illnesses qualify for the rider. 

Some life insurance providers charge a one-time processing fee of $150 to activate the accelerated death benefit rider and get the funds. Others 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 will deduct the amount you took plus interest.

Who qualifies for an accelerated death benefit?

Insurance companies will want to see a certification from a doctor or medical professional stating you are terminally ill and have a life expectancy of 12 to 24 months. However, some providers may require a life expectancy of six months or less

If you’re not terminally ill, you may still qualify for accelerated benefits. Some providers will pay out if you are critically ill, chronically ill, or need long-term care. You’ll want to work with your insurance provider to confirm what your eligibility for the rider is. 

What does the accelerated death benefit cover?

You will receive the accelerated death benefit as a lump-sum payment and it can be used however you want. You can use the money for:

  • Medical expenses 

  • Hospice

  • Nursing home

  • Private caretaker

The accelerated death benefit rider is worth adding to your policy because it’s free. But it shouldn’t replace your savings, because using the rider decreases how much money your beneficiaries receive. 

Frequently asked questions

What does an accelerated death benefit do?

An accelerated death benefit provides money for end-of-life care if you are diagnosed with a terminal illness. It can be used to pay for hospice, medical bills, a nursing home, or a private caretaker.

How much does an accelerated death benefit cost?

An accelerated death benefit rider is a free add-on to a term life insurance policy. If you use the rider to withdraw money from your life insurance policy, it will not be taxed.

When would an insurer pay out an accelerated death benefit?

An insurer will pay out the accelerated death benefit if you are diagnosed with a terminal illness and have under two years to live. You may also be eligible if you have another limiting condition.