Accelerated Benefit Policy Rider: Your Living Benefit

What if you could access the future death benefit of your life insurance policy while you’re still alive? Imagine accelerating the benefits of your policy to serve your financial needs today. What if your policy included living benefits in addition to its death benefit? Would that change the way you think about life insurance?

Many people believe life insurance only benefits loved ones after the policyholder’s death, offering no financial value during their lifetime. While providing for your family’s future is a primary purpose of life insurance—covering expenses like mortgages, student loans, and income replacement—this isn’t the only way a policy can work.

With Paradigm Life’s Perpetual Wealth Strategy™, life insurance becomes more than just a safety net for your family. It transforms into a powerful financial tool that not only protects your loved ones but also provides you with liquidity, growth, and financial flexibility while you’re still living. Let’s explore how life insurance with living benefits can work for you.

Getting Accelerated Benefits with Whole Life Insurance

Not all life insurance policies are created equal, and when it comes to living benefits, whole life insurance stands out. With its combination of guaranteed interest, potential dividends, and tax advantages, whole life insurance offers more than just protection for your family—it becomes a financial tool for your lifetime.

What Makes Whole Life Insurance Unique?

Whole life insurance provides a range of benefits that go beyond traditional coverage:

• Tax advantages: Grow your policy’s cash value tax-deferred and borrow against it tax-free.
• Cash value growth: Build a savings component you can access anytime for any expense, from retirement to emergencies.
• Liquidity and stability: Enjoy a safe, non-market-correlated place to grow your wealth.
• Asset protection: Shield your wealth from creditors and judgments.
• Customizable options: Enhance your coverage with policy riders tailored to your financial goals.

When integrated into Paradigm Life’s Perpetual Wealth Strategy™, whole life insurance becomes a cornerstone for building, protecting, and transferring wealth.

What Are Policy Riders?

Policy riders are add-ons that customize your whole life insurance policy to better suit your needs. Riders allow you to enhance your policy with additional benefits, offering more flexibility and coverage.

For example, the Accelerated Death Benefit Rider allows you to access a portion of your death benefit early if you’re diagnosed with a terminal illness, providing financial support during a critical time.

Types of Policy Riders

There are many policy riders to choose from, depending on your financial goals and life stage. Common riders include:

• Guaranteed insurability rider: Increases coverage without a medical exam.
• Paid-up additions rider: Rapidly grows your policy’s cash value and death benefit.
• Accidental death benefit rider: The accidental death benefit Provides additional benefits in the event of accidental death.
• Term conversion rider: Converts a term policy into whole life insurance without underwriting.
• Accelerated death benefit rider: Provides access to your death benefit while living.

Policy riders can range in cost, with some included at no extra charge and others requiring a nominal fee depending on the scope of coverage. At Paradigm Life, we help you choose the riders that align with your financial strategy.

What if You Need Financial Assistance? The Accelerated Death Benefit Rider

Life insurance is often viewed as a tool to protect loved ones, but what happens if you, the policyholder, face unexpected financial needs? This is where the Accelerated Death Benefit rider can provide invaluable support.

When included in your policy, the Accelerated Death Benefit rider allows you to access a portion of your death benefit while still living. This living benefit can be a financial lifeline in cases of:

• Terminal illness
• Critical or chronic illness
• Long-term care needs
• Assistance with daily living functions or organ transplants

As described by New York Life on NewYorkLife.com, the Accelerated Death Benefit rider “entitles the policy-owner to an early (accelerated) payout of policy death benefits, if the insured is diagnosed with a terminal illness…offering peace of mind at a critical time.”

How This Rider Helps Policyholders

Medical bills for terminally ill patients can be overwhelming, adding financial stress to an already difficult time. The Accelerated Death Benefit rider ensures policyholders can:

• Cover the escalating costs of medical care.
• Fund essential living expenses during long-term care.
• Maintain financial independence during health crises.

While this rider has become standard in the life insurance industry, terms and conditions vary significantly between providers. That’s why it’s important to work with a Wealth Strategist o customize your policy and ensure you have the coverage that fits your needs.

The Power of Customization

Whole life insurance policies, enhanced by riders like the accelerated benefit rider, deliver unparalleled flexibility. Other popular riders include the Guaranteed Insurability rider, term conversion rider, paid-up additions rider, and accidental death benefit rider. These options ensure your coverage evolves with your needs while maintaining cost efficiency.

Different insurance providers may use various terms and guidelines for these riders. That’s why working with a Paradigm Life Wealth Strategist is essential. Our experts help you select the right riders, tailoring your policy to meet your financial goals and provide peace of mind for you and your family.

Who Qualifies for an Accelerated Benefit Policy Rider?

An Accelerated Benefit Policy Rider offers a valuable lifeline for policyholders facing significant health challenges. By allowing early access to the death benefit of your whole life insurance policy, this rider provides financial support when you need it most.

To qualify, your health status must place you in one of the following categories:

1. Terminal illness
2. Critical illness
3. Chronic illness
4. Long-term care needs

Let’s explore how these conditions impact eligibility and benefit payouts.

1. Terminal Illness Death Benefit

If you’re diagnosed with a terminal illness that shortens your life expectancy to 6–24 months, most insurance companies allow you to access a portion of your death benefit.

How it works:

• Payouts are typically made as a lump sum but can be structured as periodic payments or reimbursements for medical expenses.
• Funds can cover end-of-life care, outstanding debts, or other financial needs, giving you peace of mind during a challenging time.

2. Critical Illness

For severe medical conditions that aren’t terminal but significantly affect life expectancy or incur high medical costs, such as:

• Cancer
• Heart attack or stroke
• Coma or paralysis
• Kidney failure
• Organ transplants (pre- or post-surgery)

How it works:

• Payments often mirror those for terminal illness, offered as a lump sum or in structured payouts.
• These funds can help offset medical bills, treatment costs, or lost income during recovery.

3. Chronic Illness

If you have a chronic illness that interferes with daily life or reduces your quality of life, you may qualify for early access to your policy’s death benefit. Conditions often include:

• Severe arthritis
• Cognitive impairments like dementia

How it works:

• Payouts are typically made annually but can also be issued as a lump sum.
• Use funds to cover caregiving costs, specialized equipment, or home modifications.

4. Long-Term Care Needs

For policyholders requiring extended hospice or nursing home care not covered by traditional health or disability insurance, the Accelerated Benefit Rider can provide financial relief.

How it works:

• These benefits help cover costs for indefinite care, ensuring you or your loved ones are supported.
• Payments can be structured as reimbursements or direct payments to care providers.

How Paradigm Life Can Help

At Paradigm Life, we understand that life doesn’t always go as planned. That’s why our Wealth Strategists work closely with you to customize your whole life insurance policy, ensuring you have the right riders in place to protect your financial security.

The Accelerated Benefit Rider is just one of the many ways whole life insurance can provide flexibility and peace of mind, helping you navigate life’s uncertainties while staying aligned with your broader financial goals.

Payment and Payouts for an Accelerated Death Benefit Rider

Adding an Accelerated Death Benefit Rider to your whole life insurance policy provides financial flexibility when you need it most. Understanding the payment options and their implications is essential to choosing the right structure for your financial goals.

At Paradigm Life, we integrate these options into The Perpetual Wealth Strategy™, ensuring your policy aligns with your long-term financial plan. Here’s what you need to know about payment structures and payouts.

Payment Options for Accelerated Death Benefit Riders

Insurance companies typically offer two payment options for this rider:

Upfront Payments

With this option, the cost of the rider is added to your policy’s base premium and billed annually, monthly, or quarterly—based on your payment schedule.

• Predictability: You’ll know the exact cost of the rider from the start.
• Budgeting advantage: Payments are spread out, simplifying financial planning.

For example, if your base premium is $10,000 annually and the rider costs $200 annually, your total premium becomes $10,200.

No-Cost Riders

Many insurance companies include the Accelerated Death Benefit Rider at no additional cost upfront. You only pay if you use the benefit, and the cost is calculated based on factors like current interest rates and mortality risks at the time of activation.

• Cost-effective: Ideal if you want the option without immediate expenses.
• Variable costs: Activation costs depend on your policy’s terms and market conditions.

Accessing Your Death Benefit

Most policies allow you to access 25% to 100% of your death benefit, often capped between $250,000 and $500,000. While this can provide essential financial support, it’s important to understand how accessing your death benefit affects your policy:

1. Reduced death benefit: The amount accessed is deducted from the benefit available to your beneficiaries.
   • Example: If your policy’s death benefit is $1,000,000 and you use $250,000, the remaining benefit for your beneficiaries will be $750,000.
2. Lower premiums: Your premiums for the remainder of the policy term may decrease to reflect the reduced coverage.
3. Impact on cash value: Accessing your death benefit may reduce your policy’s cash value, which could affect other financial strategies tied to the policy.

Customized Guidance for Your Financial Needs

Choosing the right payment strategy depends on your unique financial situation and goals. Working with a Paradigm Life Wealth Strategist ensures you receive expert advice tailored to your needs. Whether you prefer the predictability of upfront payments or the flexibility of no-cost riders, we’ll help you customize your policy to maximize its value—both now and in the future.

How Is an Accelerated Benefit Policy Rider Used?

An accelerated death benefit rider provides financial flexibility during some of life’s most challenging moments. By allowing early access to the death benefit of your whole life insurance policy, it helps you address significant expenses and focus on what matters most—your health, family, and quality of life.

Here are some of the most common ways policyholders use accelerated benefits:

1. Covering Medical Expenses

Accelerated benefits can help bridge the gap where health insurance falls short, including:

• Nursing home or hospice care: Ensure you or your loved ones receive quality care.
• Medical bills: Cover treatments, medications, and specialized care.
• In-home caregivers: Hire professionals to assist with daily living needs.

2. Adapting to Changing Needs

For those with chronic or critical illnesses, these funds can be used to make life more manageable and comfortable by:

• Home modifications: Install wheelchair ramps, widen doorways, or upgrade bathrooms for accessibility.
• Transportation needs: Purchase or modify a vehicle for medical transport or mobility support.

3. Supporting Family Caregivers

When family members reduce work hours or leave jobs to provide care, accelerated benefits can help supplement their lost income. This ensures your family can focus on caregiving without financial strain.

4. Creating Meaningful Memories

For some, these benefits are an opportunity to focus on what matters most—spending quality time with loved ones. Funds can be used to:

• Plan a family vacation.
• Fulfill personal bucket list goals.
• Celebrate milestones and create lasting memories.

These experiences offer emotional healing and help families cherish their time together.

Taxes and Other Considerations

Insurance payouts from an accelerated benefit rider are usually federal income tax-free if they are paid out in one lump sum and don’t exceed the basis of your whole life insurance policy (the total amount you’ve paid in premiums). If you elect to receive your payouts in periodic installments, they may accrue taxable interest.

An accelerated benefit rider may affect your eligibility for other financial assistance, including Social Security income and Medicaid. Be sure to speak with your tax advisor or consult with a Wealth Strategist if you’re considering using an accelerated benefit rider but rely on either of these two forms of financial assistance. It’s possible to structure payouts so you don’t put your other benefits at risk.

Accelerated Benefit Rider vs. Policy Loan

Both accelerated benefit riders and policy loans allow you to access funds from your life insurance policy while you’re still living, but they serve distinct purposes and come with unique advantages. Understanding the differences can help you decide which option best suits your needs.

Accelerated Benefit Rider

An accelerated benefit rider provides early access to a portion of your policy’s death benefit if you face qualifying circumstances like terminal, chronic, or critical illness, or require long-term care. This option is specifically designed to help with significant health-related expenses, such as medical bills, hospice care, or home modifications.

Key features:

• Purpose: Covers illness-related costs or caregiving needs.
• Impact on death benefit: Reduces the death benefit available to beneficiaries by the amount used.
• Cost: May be included at no charge or come with an upfront or usage-based cost.
• Tax implications: Typically tax-free when used for qualified expenses but could impact eligibility for government assistance programs like Medicaid.

Policy Loan

A policy loan allows you to borrow against the cash value of your whole life insurance policy for any purpose, not just medical needs. Unlike the accelerated benefit rider, policy loans let you preserve your death benefit while accessing funds.

Key features:

• Purpose: Offers unrestricted use—whether for investments, education, emergencies, or leisure.
• Impact on death benefit: Any unpaid loans reduce the death benefit and cash value but do not directly diminish the policy size.
• Cost: Borrowers pay interest, typically lower than traditional loans.
• Tax implications: Tax-free access to funds, and the policy continues earning interest and dividends on the full cash value.

Which Option Should You Choose?

• Choose the accelerated benefit rider: If you need immediate financial assistance due to illness or caregiving needs and have limited cash value in your policy.
• Choose a policy loan: If you need flexible funding for non-medical purposes or want to preserve your death benefit for your beneficiaries.

Both options can be valuable tools within a comprehensive financial plan. A Paradigm Life Wealth Strategist can help you determine the right strategy based on your specific circumstances and financial goals.

What’s a Viatical Settlement?

If your financial circumstances or family dynamics have changed since purchasing your life insurance policy, a viatical settlement might provide a solution. This option allows you to access funds from your policy while you’re still living, particularly if you no longer need the death benefit to support beneficiaries or if maintaining premiums during an illness has become a burden.

How Viatical Settlements Work

For permanent life insurance policies, like whole life insurance or universal life, a viatical settlement enables you to sell your policy to a third party. Here’s how it works:

1. Lump sum payment: The third party pays you a lump sum—more than the policy’s cash value but less than its death benefit.
2. Transfer of ownership: The buyer assumes responsibility for all future premium payments and becomes the new beneficiary.

This arrangement can provide financial relief, but it’s crucial to understand its long-term implications. Working with a Paradigm Life Wealth Strategist ensures you explore all options and choose the best path for your needs.

Who Qualifies for a Viatical Settlement?

You must meet specific health-related qualifications similar to those for an Accelerated Benefit Policy Rider, including:

• Terminal illness: Life expectancy of 6–24 months.
• Critical illness: Severe medical conditions like cancer or organ transplants.

Chronic illness: Conditions requiring long-term care or assistance with daily activities

The Accelerated Benefit Policy Rider: A Powerful Alternative

While a viatical settlement is an option, an Accelerated Benefit Policy Rider offers a more integrated solution. This rider allows policyholders to access a portion of their death benefit under specific circumstances, such as:

• Medical expenses: Covering costs for treatments, caregivers, or hospice care.
• Daily living costs: Managing income loss or caregiving expenses.
• Personal fulfillment: Funding meaningful experiences like family vacations or completing bucket list goals.

Unlike a viatical settlement, which transfers ownership of your policy, an Accelerated Benefit Rider keeps you in control of your life insurance.

How to Add an Accelerated Benefit Policy Rider

Most life insurance providers offer this rider, often at no additional cost. In some cases, there may be a nominal fee depending on the depth and terms of coverage.

When can iou add it?

• During policy purchase: Riders are typically added when the policy is purchased.
• After purchase: Some providers allow riders to be added later, subject to eligibility requirements.

Steps to Add an Accelerated Benefit Policy Rider:

1. Review your policy options: Work with a Wealth Strategist to understand your current policy’s flexibility and the available rider options.
2. Evaluate costs and terms: Confirm whether the rider is included at no cost or requires an additional premium, and review payout limits and conditions.
3. Customize your coverage: Tailor your policy to meet your unique financial and health-related needs, ensuring it aligns with your long-term goals.

FAQ

Q: What is an accelerated benefit policy rider, and how does it enhance living benefits in insurance policies?

A: An accelerated benefit policy rider allows policyholders to access a portion of their death benefit in case of a qualifying illness, injury, or medical condition, providing financial support when it’s needed most and enhancing the value of living benefits.

Q: What are some typical qualifying conditions that enable policyholders to utilize the accelerated benefit policy rider?

A: Qualifying conditions may include critical illnesses, terminal illnesses, or chronic conditions, depending on the terms of the policy and the specific rider, offering flexibility and financial assistance during challenging times.

Q: How can individuals benefit from considering insurance policies with the accelerated benefit policy rider in their financial planning?

A: Individuals can benefit by having a financial safety net in place to address unexpected health-related expenses, maintain their quality of life, and alleviate the financial burden that may accompany a serious illness or medical condition.

Why Choose Paradigm Life?

At Paradigm Life, we do more than offer life insurance—we partner with you to create personalized solutions that align with your financial goals. Our expert Wealth Strategists take the time to understand your unique needs, guiding you toward policies and riders that provide optimal protection and value.

Whether you’re navigating a medical challenge or planning for a secure financial future, we’re here to ensure your life insurance works harder for you. With our tailored approach and ongoing support, Paradigm Life helps you unlock the full potential of your policy.

Take Control of Your Financial Future with Paradigm Life

Empower your financial future with the Accelerated Benefit Policy Rider—a transformative feature that adds flexibility and peace of mind to your life insurance plan. By integrating this rider into your policy, you turn traditional coverage into a dynamic tool for addressing life’s unexpected challenges while securing your long-term goals.

At Paradigm Life, we integrate the Accelerated Benefit Policy Rider into The Perpetual Wealth Strategy™, creating a comprehensive plan that grows, protects, and transfers your wealth. Our Wealth Strategists provide expert guidance and personalized solutions to ensure your policy aligns with your financial vision.