Accelerated death benefit
A payment from a life insurance policy to the insured person while they are still alive, when they are terminally or chronically ill.
What it means
An accelerated death benefit pays part of the policy's value early. What remains is reduced accordingly, and the beneficiaries receive less.
It is offered either as a policy provision or as a rider, and eligibility usually requires a physician's certification of terminal or chronic illness.
It is not the same as selling a policy to a third party, which is a separate market with different consequences.
Why it matters
It is a source of money at exactly the moment a family is running out of it, and many policyholders do not know their policy has the provision.
It has consequences worth understanding first: less for the beneficiaries, and possible effects on means-tested benefits.
When you are likely to meet it
- When a parent has a terminal diagnosis and costs are mounting.
- When reviewing what a life insurance policy actually offers.
- When hospice care is being arranged.