What is an Accelerated Death Benefit?

An accelerated death benefit is a portion of a life insurance policy that allows policyholders to receive their death benefits before they actually die.

How Does an Accelerated Death Benefit Work?

For example, let's say Jane Doe bought a life insurance policy with an accelerated death benefit. The life insurance policy will pay her son and daughter $500,000 upon her death (this is called the death benefit).

Jane bought the policy when she was 45; now she is 75 and has been diagnosed with Alzheimer's disease. The disease is aggressive, and Jane's doctors say she is likely to die within 12 to 18 months. Jane's treatments are very expensive.

To obtain cash for her living and medical expenses, Jane taps into the accelerated death benefit of her policy. This gets her a portion of her policy's death benefits now—say, $300,000.

Of course, this reduces the amount available to Jane's son and daughter upon her death, and the sudden inflow of $300,000 might jeopardize her ability to qualify for Medicaid or even reduce her Social Security benefits.

Why Does an Accelerated Death Benefit Matter?

The conditions for using a policy's accelerated death benefits vary by issuer, and often the issuer requires the insured person to continue making premium payments even when he or she is receiving accelerated death benefits. However, in general, buying a policy with an accelerated death benefit provides a way to pay for expensive senior care when it's too late to purchase long-term care insurance.