Life Insurance & Accelerated Death Benefit Rider

An accelerated death benefit (ADB) is a life insurance rider that pays out some of the death benefit while you are alive if you are considered terminally ill or chronically ill. It is a living benefits rider that lets you withdraw from the death benefit when you have a terminal illness. With most companies, this rider is usually included in your policy at no extra cost to you. Both term life and universal life policies offer this extra rider. Here we discuss who qualifies for the ABD rider, how it works, and what expenses it covers.

Who qualifies for an accelerated death benefit?

Patients who are considered terminally ill or chronically ill can qualify for the funds from the ADB rider. Terminally ill patients are those that have been diagnosed with an illness or condition that is expected to result in death within 12 months or less. The insurance company will want to see a certification from a doctor or medical professional stating that you are terminally ill and have a life expectancy of 12 months or less.

Chronically ill patients are those that are unable to perform 2 of the 6 activities of daily living for a period of at least 90 days or requires constant supervision to protect from threats to health or safety due to severe cognitive impairment. The activities of daily living include bathing, continence, dressing, eating, toileting, and transferring. 

How does the accelerated death benefit work?

If you access your death benefit before you die using the ADB rider, you receive a portion of the death benefit to pay for medical care or anything else that you may need. Some companies will only let you take out a partial amount of the death benefit, whereas other companies will allow you to withdraw the entire death benefit. 

The remainder of your life insurance benefit not taken out for the ADB rider goes to your beneficiaries after you die. Keep in mind that the amount taken out by the ADB rider reduces the amount of money your beneficiaries receive after you die. For example, you have a $500,000 term life policy and you use $300,000 for the ADB rider, the remaining $200,000 will be paid to your beneficiaries after you die. Another thing to keep in mind is that you cannot give back and unused ADB rider money. Once it is paid out in a lump sum, it cannot be given back to the insurance company in order to increase the death benefit for your beneficiaries. 

​What expenses does it cover?

The money you receive can be used however you want, though most people use it towards medical expenses that would alleviate any financial burden during your final time. You can use it for hospice, nursing home, medical supplies, and for a private caretaker.

What is it not?

One thing to keep in mind is that an accelerated death benefit rider is not a long-term care policy, nor is it a Medicare supplement policy. Those are separate policies that you can purchase. Long-term care does not assume terminally or chronically ill. You can only access the funds in ABD rider if you are terminally ill or chronically ill as certified by a medical professional.