You typically buy life insurance to protect those who depend on you for financial security. If you die prematurely, it’s your life insurance that can provide your loved ones with the ongoing income they’ll need to live on. However, your life insurance policy may also provide you (the policy holder) with certain living benefits that you could tap into in the event you become seriously ill. This is called an accelerated death benefit (ADB) rider.
How does accelerated death benefit (ADB) work?
Having a benefit rider in place isn’t necessarily for you to receive a payment, but it does allow you to access some of the death benefit proceeds so you can get your affairs in order. Having access to your life insurance proceeds ahead of time will enable a policyholder to make arrangements and settle your affairs.
The amount of the benefit that you can use and when it can be used will depend on the specific accelerated death benefit rider you have.Generally a ADB will go into effect if your life expectancy is 12 months or less. This benefit payment will reduce the death benefit of the policy on a dollar-for-dollar basis.
Key items you’d need to know about a ABD:
- Accelerated death benefits are usually not taxed as income.
- In order to qualify for an ADB, a policy owner needs to provide proof that he/she is chronically or terminally ill. A few critical illnesses are cancer, heart attack, stroke, kidney failure.
- Taking ADB will reduce the amount of money received by beneficiaries.
To learn more about accelerated death benefit (ABD) please contact us at mypfg.com today!