Someone received the dreaded news from their medical doctor. They have twelve months to live or less. Panic, denial, anger has set in. Then their attention also may turn to their finances. There is one place of available cash today that too many people are unaware of. Look no further than their current life insurance policy. Many policies today have a rider (a change or addition to their policy) or as a standard provision , a feature called the “Accelerated Death Benefit”. It is also referred to as the “Living Benefit” provision.
It allows the insured to withdraw up to 60% (varies with each carrier) of the policy’s face amount (the death benefit) today and pay no income taxes on the amount withdrawn. The funds can be used for any purpose like pay medical bills, take a trip or gift money to anyone.
There is no premium for this rider or provision. Just notify the insurance carrier along with your medical doctor’s letter of your terminal diagnosis.
This provision or rider can be attached to any term life insurance policy or permanent policy like a whole life or universal life policy. However, this provision (like all riders) must be added at the time of application. You cannot routinely add riders or provisions to your policy after the policy has been issued.
Ok, all sounds good. What if you outlive the twelve month grim prognosis? No problem. There is no requirement to repay the amount of money that was withdrawn from the policy. Say someone has a $500,000 face amount life insurance policy and withdraws $200,000 today due to a terminal illness. The person lived another 15 years. The person’s beneficiary will receive $300,000 at his/her passing.
Sadly tens of millions of dollars that could have paid out to terminally ill people were not paid to insureds for one sad fact. Many people today were unaware of this provision. So, simply find your life insurance policy today and look for this important feature. Can’t find your policy? Contact your insurance carrier and ask about the key features in your policy. And also request a duplicate policy. And if you completing a life insurance application now, always make sure that the Accelerated Death/Living Benefit feature is included in your policy. We never know when this feature will make a significant difference in our everyday lives.
