An accelerated death benefit rider (ADB) is a living benefits rider. This policy add-on lets you withdraw from your life insurance policy’s death benefit if you have a terminal illness. The accelerated death benefit rider is usually included in your policy at no extra cost to you.
This money is most often 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.
If you’re diagnosed with a terminal illness, it may be financially prudent for you to use your own savings instead of withdrawing from the death benefit of your life insurance policy.
How does the accelerated death benefit work?
If you exercise an 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, but the exact amount 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, nor will the amount your beneficiary receives be taxable.
All of the life insurance companies Policygenius partners with 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, qualifying events that allow you to exercise the rider will be written in your insurance contract. Not all illnesses will qualify you to use the rider.
Additionally, 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.
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 withdrew plus interest.
Who qualifies for an accelerated death benefit?
Most insurance companies will want to see 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.
If you’re not terminally ill, you may still qualify for accelerated benefits. Some providers will pay out if you’re critically ill, chronically ill, or need long-term care. You’ll want to work with your insurance provider to confirm your eligibility for these benefits.
What does the accelerated death benefit cover?
You’ll receive the accelerated death benefit as a lump-sum payment and it can be used however you want. Most people use the money for:
Medical expenses
Hospice
Nursing home
Private caretaker
As a life insurance agent, advising thousand 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 and optional to use if you’re ever diagnosed with a terminal illness.
→ Read more about life insurance riders
Frequently asked questions
What does an accelerated death benefit do?
An accelerated death benefit is a provision in a life insurance policy that allows you to claim part of the death benefit while you’re still living.
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?
The exact terms that allow you to exercise this rider will be written out in your life insurance policy. Generally, you’re able to exercise this rider if you have been diagnosed with a terminal illness and told that you have less than two years to live.
