An accelerated death benefit gives you access to part of your life insurance payout while you are still alive, usually during a serious illness. This guide explains how it works, who qualifies, what it can cover, and how it compares to other options, so you can make an informed decision.
Definition and Purpose
An accelerated death benefit is a feature in many life insurance policies that allows a policy owner to take a cash advance against the death benefit if certain conditions are met, most often a terminal or qualifying chronic illness. Taking these funds reduces what beneficiaries receive later, but it can help pay medical bills, home care, or everyday expenses when cash flow is tight. For an in-depth overview, see Investopedia’s overview of the accelerated death benefit.
Who Qualifies for an Accelerated Death Benefit
To qualify for an accelerated death benefit, your life insurance policy typically requires a terminal illness diagnosis (with a doctor’s certification) and a limited life expectancy (usually 12 to 24 months), or a chronic or critical illness. These requirements can vary by insurer. Some policies include this benefit at no extra cost, while others require an add-on feature called a rider. A rider is an optional provision that can be added to your policy to provide additional benefits, although it may incur an extra fee.
Get a sense of typical triggers and timing in NerdWallet’s guide to life insurance accelerated benefits.
How Much You Can Access, Fees, and Disclosures
Payouts are often a percentage of the face amount, subject to caps. The amount you receive and the reduction to your policy can be calculated in different ways, such as a discounted death benefit or a dollar-for-dollar reduction. Companies must also provide disclosures that explain how the acceleration affects your death benefit, cash value, premiums, and any administrative fees or interest. For consumer definitions and required disclosures around “accelerated” or “living” benefits, review this state consumer Q&A on accelerated benefits.
Rider Basics and How Claims Work
Many policies include an accelerated benefit rider, or you can add one when you buy coverage. A typical rider explains the qualifying conditions, how to file, the required medical documentation, and whether there is a waiting period or an administrative charge. For a practical description of how an accelerated death benefit rider works and what it can cover, review Aflac’s consumer explainer.
Taxes and Impact on Beneficiaries
Accelerated proceeds for a terminal illness are often not taxable, although rules can vary by situation, and taking funds will reduce what your beneficiaries receive later. Speak with a tax professional about your policy and diagnosis, especially if you are considering a chronic or critical illness claim. Your insurer can provide an illustration that shows the projected reduction to your death benefit after acceleration.
When an Accelerated Death Benefit May Be a Good Fit
- You have a qualifying diagnosis and need cash to cover treatment, home health, or daily living costs.
- Your policy includes the rider, and the available amount meets your near-term needs.
- You want to keep the policy in force for your beneficiaries, even after taking a portion now.
When an Accelerated Death Benefit Might Not Be Enough
If your policy does not include an accelerated benefit, if you do not meet the medical criteria, or if the available amount is too small, you can consider other ways to unlock value:
- Sell a life insurance policy for a lump sum if you are eligible and want maximum proceeds in exchange for transferring ownership.
- For severe or terminal illnesses, consider the viatical settlement option, which can be designed for people with significant health challenges.
How to Start a Claim
- Contact your insurer and request the accelerated benefit packet or rider claim form.
- Ask for a written summary showing the qualifying conditions, the maximum you can accelerate, fees or interest, and how the death benefit will be reduced.
- Have your physician complete the medical certification, including life expectancy or clinical criteria if required.
- Review the illustration with your family so everyone understands the tradeoffs before you sign.
- Submit the claim and keep copies of all documents. Ask for the expected timeline for a decision and payment.
Bottom Line and Next Step
An accelerated death benefit can relieve financial pressure during a difficult time, but it reduces what your beneficiaries will receive later. Review your rider, confirm eligibility, and compare alternatives if you need more funding. If you want to understand what your policy could be worth today, you can get a quick estimate.
