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Accelerated Death Benefits Rider

Most life insurance policies have a section / rider that allows for an acceleration of the life insurance benefits.  It is also a source of litigation because the life insurance companies have a strong tendency to deny claims made for these benefits.

Insure.com published an article on this subject in September 2019.  The article is titled, Accelerated Benefit Riders: How Your Life Insurance Can Help You While You’re Still Alive.

The article tells us , as life expectancy creeps to 80 years old, more Americans are turning to life insurance to help them while they’re still alive.  One example is an accelerated benefits rider (ABR).

ABRs let policy holders use their policies to pay for care for chronic illness, terminal illness and long-term care.  Some may view it even as a retirement account for their care.  ABR’s can help pay for many things, such as, hospital bills, travel for care, renovations to help the person stay in the home, and lost income for the individual or caregiver.

The rider also lets a person tap into a life insurance policy, while still leaving loved ones with the remaining life insurance benefits.

ABR’s have picked up in popularity with more than 3 million Americans having ABR’s on their life insurance policies and more than 150 insurance companies offering accelerated benefits.

ABRs gives the policyholder funds under certain circumstances, such as if the person is diagnosed with a terminal illness, chronic illness or needs long-term care.  The policy may require that a person who is in long-term care must not be able to perform regular daily functions, including eating, dressing and bathing.

There are often limitations to these plans.  For example, if the policyholder gets a terminal illness, death must be expected within a certain period, such as one year.

Some companies offer two types of ABRs for long-term care and chronic illness, said the riders make it easier to facilitate needs-based planning for the potential expenses associated with care when someone ages.  This kind of care can impact retirement plans, savings, assets and the level of care one receives.

The national average for long-term expenses ranges from $47,840 for a full-time home health aide to $102,911 for a private room in a nursing home.

ABRs often appeal to individuals interested in planning for potential care needs of the future with a dual-purpose product that eliminates the “use it or lose it” risk of traditional life insurance.  With ABRs, one benefit helps address the financial risks a client faces when chronically ill or in need of long-term care and the other provides a death benefit in the event that a chronic illness condition or the need for long-term care does not arise.

ABRs are often for people who can’t afford a traditional long-term care policy, but want some protection for long-term care expenses.

Whatever money is taken from the policy while the person is alive is deducted from the life insurance paid to the beneficiary after the policyholder dies.  Life insurance companies usually allow policyholders to get 25 to 100% of their death benefit.

If the policyholder is diagnosed with a covered illness, the person should notify the life insurance company.

The insurer’s claims department will review the medical records and provide an estimated payout based on the life expectancy.

If the policyholder accepts, the life insurance company will usually pay a lump sum to the person within a couple of weeks.  Of course, the kicker here is, the insurance companies often deny this claim for benefits and for a person to get any benefit, they are forced to hire an attorney to litigate the issue.

A person can add ABRs onto existing life insurance policies.  These types of riders usually cost little and some insurers even offer them for free, but may charge a fee if money is withdrawal while the policyholder is alive.

People shouldn’t wait to add the rider until they are diagnosed with a terminal illness, chronic illness or need long-term care.  Policyholders who wait until then might get denied coverage or may pay a lot more for coverage than a healthier person.

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