Life insurance is, usually, purchased to provide financial support for your family upon your death. A pre-arranged sum of money is disbursed to your loved ones to be used in any way they choose—from paying off your mortgage, student and auto loans, and taxes, to replacing your income for the daily expenses of living.
However, traditional policies are designed to accommodate the needs of the “average” customer. Insurance providers recognize that to truly meet specific needs of individual people and families, one-size-fits-all policies need to be customized. So they offer “policy riders” that are add-on features. Essentially, a policy rider offers benefits and coverage that enhance your basic policy.
Policy Rider 101
There are many types of policy riders, including Guaranteed Insurability rider, Term Conversion rider, Disability Waiver of Premium rider, Accidental Death Benefit rider and more. These riders range, in cost, from “included free” to nominal fees, upon exercising the option, to additional premium charges (depending upon the depth and scope of the rider). All are available to provide your loved ones with the most protection and the best continued lifestyle possible.
However, sometimes, you, the actually policy-holder, may be the one who needs financial assistance before gaining access to your policy’s death benefit, i.e., being diagnosed with a terminal illness. Recognizing the escalating costs of covering such medical bills, life insurance companies introduced the Accelerated Death Benefit rider to provide a living benefit to their customers.
As New York Life Insurance describes their Living Benefits Policy Rider, “(It) can help offer peace of mind at a critical time. It entitles the policy-owner to an early (accelerated) payout of policy death benefits, if the insured is diagnosed with a terminal illness… As a person deals with the emotional and physical struggles of terminal illness…the last thing needed is the additional stress of astronomical medical bills.” (New York Life.com)
While the Accelerated Death Benefit rider has become standard, in the industry, different companies have different terms and guidelines. With a short life expectancy, usually up to 12 months, some companies allow the policy-holder to receive 75% of their death benefit; others allow up to 50%. And the maximum amount is, usually, capped at $250,000 – $500,000.
Many people find this particular rider a very worthwhile addition to their life insurance policy. Again, New York Life sums up why, “The sad irony is that, while the patient may have substantial collateral in life insurance policies, those funds are technically ‘off limits.’ The LBR (Living Benefits Rider) breaks down the ‘off limits’ fence.”
If you would like to know more about the Accelerated Death Benefit policy rider and how it might affect the quality of your life, schedule a free consultation with a Paradigm Life agent.