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Using Accelerated Death Benefits to Pay for Long Term Care
| Definition |
Qualifications |
Costs |
| Pros & Cons |
Benefit Types & Limits |
How to Apply |
| Overview of Accelerated Death Benefits | ||
An accelerated death benefit allows a life insurance policy owner to receive a portion of their death benefit from their insurance company in advance of their death. The policy holder must be terminally ill, usually with a life expectancy of 2 years or less. They must continue to make their policy’s monthly payments while receiving benefits. Note this differs from a death benefit loan in that accelerated death benefits do not need to be re-paid.
Terminally ill seniors, that have life insurance policies, are able to receive a portion of their death benefit from their insurance company in advance of their death. This is referred to as Accelerated Death Benefits or ADB. These benefits can be used for any purpose the senior chooses. ADB beneficiaries still receive a death benefit, although it is reduced by the amount of the Accelerated Death Benefit. For life insurance holders this has become a valuable source of funds to pay for their long term health care costs.
A similar option for terminally ill seniors is a viatical settlement in which the policy is sold to a 3rd party company and the senior receives a lump sum settlement. The major difference between accelerated death benefits and viatical settlements is that with ADB the policy owner must continue to pay the monthly premiums. With a viatical settlement, the purchaser of the policy takes over the monthly payments. For this reason, seniors might consider a viatical settlement instead.
ADBs are a relatively new option. As a result, elderly individuals who have had their policies for many years may find no mention of the ADB option in their policy. Interested individuals should ask their life insurance provider directly if this option is available.
Be Aware That:
Generating a lump sum of cash through an accelerated death benefit may change the financial status of a senior and disqualify them for Medicaid or Supplemental Social Security.
Accelerated Death Benefits are Also Known As:
-ADB
Qualification for accelerated death benefits varies by both insurance company and policy. The information below is typical of a company but be aware that exceptions exist.
Age Requirements
There are no age requirements to be eligible for accelerated death benefits.
Disabilities / Health Requirements
Each company has different requirements for accelerate death benefit eligibility. Generally policy holders with a terminal illness and a life expectancy of less than 2 years are eligible.
Family Status
Marital or family status is not usually considered by companies in determining eligibility for accelerated death benefits.
Financial Status Requirements
The financial status of the insured is not a factor considered by companies in determining eligibility for accelerated death benefits.
Veteran Status Requirements
The veteran status of the insured is not a factor considered by companies in determining eligibility for accelerated death benefits.
Geographic Requirements
The geographic location of the insured is not a factor considered by companies in determining eligibility for accelerated death benefits.
Types of Benefit Payout
Accelerated death benefits are most frequently paid out in a single lump sum however some insurance companies offer monthly installments.
Restrictions on How Payout Can be Used
There are no restrictions on how accelerated death benefits can be used.
Benefits Amounts & Limits
Accelerated death benefits can be as high as 80% of death benefit. Typically the insurance company sets a maximum benefit amount based on life expectancy and the policy holder makes the final decision on how much they require.
Time to Receive Benefits
Accelerated death benefits can be paid in as few as 4-6 weeks. As one is dealing directly with their insurance company, policy holders receive their benefits faster than a viatical settlement in which the senior sells the policy to a 3rd party.
This Source Can Help For
Any purpose the policyholder or their family chooses including:
-In-home care
-Adult day care
-Assisted living / senior living
-Skilled nursing home care
-Alzheimer's / dementia care
-Adult day care
-Assisted living / senior living
-Skilled nursing home care
-Alzheimer's / dementia care
Insurance companies do not charge policy holders to receive death benefits. Although some companies now include a fee to be eligible when the insured is purchasing the policy.
Individuals wanting to receive accelerated death benefits should contact their life insurance provider directly.
Applications typically require a release of medical information so the insurance company can independently evaluate the life expectancy of the insured.
Applications typically require a release of medical information so the insurance company can independently evaluate the life expectancy of the insured.
