Texas residents who have found out they are terminally ill might want to include accelerated death benefits in their life insurance policy. It’s important to know what this is and how it works.
What are accelerated death benefits?
An accelerated death benefit (ADB) is a rider on a life insurance policy when you are terminally ill. Many people who get it have between 12 to 24 months to live. Benefits can be used toward medical expenses and anything else to relieve financial burdens.
How do accelerated death benefits work?
If you choose a life insurance policy that includes an accelerated death benefit, it can help ease some of your financial burdens regarding your medical care. It could also go toward hospice care or hiring a home health aide once you’re unable to care for yourself. Depending on the policy, you might be allowed to withdraw up to 50% of your benefit. However, whatever you withdraw is deducted from the amount of money your beneficiaries inherit from your life insurance after you pass away. Money withdrawn from accelerated death benefits is tax-exempt.
There are certain limitations to ADBs. If you take out a loan on your policy and you have permanent life insurance, you get the ADB minus the amount of the loan if it’s outstanding.
Not all illnesses can qualify for ADBs. Sometimes, there’s a fee included depending on your provider. Some insurance providers may also treat an ADB as a lien, which means you will accrue interest. This means that whatever the amount is left over in death benefits to your beneficiaries, there will be money deducted to account for the ADB plus interest.
Sometimes, it’s possible to qualify for these benefits even if you are not terminally ill. Some insurers will provide it if you have a critical or chronic illness or require long-term care.
An accelerated death benefit could bring you some relief in your final days.