Accelerated Death Benefit

life insurance terminal illness rider

Life insurance policies are designed to first and foremost pay a death benefit upon the demise of the insured. Whether we are talking about a term or permanent policy, the one constant is, they are here to cover financially for your beneficiaries when you no longer can.

Another situation where someone may be unable to provide for their loved ones is in the case of a terminal illness. Additionally, terminal illness can come with its own set of exorbitant costs that are not always covered by health insurance. Such as an organ transplant, home health care, etc.

Therefore, many life insurance policies come with a rider that will accelerate part of the death benefit if the insured is deathly ill. The exact specifications and details differ from carrier to carrier, and we will break them down in detail shortly, but the main point is to offer a lump sum of cash prior to the death of the insured, if they are seriously ill.

How does the life insurance terminal illness rider work?

Upon qualification, usually once a doctor signs off that the patient has between 12 to 24 months left to live, the life insurance will provide a portion of the death benefit in a tax-free lump sum to the insured. While the idea is that it will be used to pay for pressing medical and emergency needs, there are actually no limits on what the monies can be used for. No receipts will be requested, as it is not reimbursutory, rather the money is paid out as a benefit.

Most insurance companies will charge a one-time nominal fee, for example $150, to exercise this rider.

If the insured makes a miraculous recovery, the benefit money does not need to be repaid. Rather, the amount accelerated will be deducted from the final death benefit, with some companies charging interest as well, if it is ever paid out, depending on the terms of coverage.

Rider Variations

Below is a chart highlighting various life insurance companies and their specifications for the accelerated benefit or terminal illness rider.

The following data points were taken into account:

  • Maximum amount of coverage available for acceleration
  • The administrative fee charged upon execution
  • Required maximum life expectancy to qualify as “terminally ill”

 Life Insurance Accelerated Death Benefit Rider


  • Are long term care and accelerated death benefits taxable?

    In most situations, and with the proper setup, these benefits will not be taxable. However, they can affect eligibility for government benefits such as Medicaid.

  • Is accelerated death benefit worth it?

    That would depend on each individual scenario. Many would argue that it would be nice to be able to live comfortably during a person’s last few months.

  • What are the characteristics of the accelerated death benefit option?

    The exact specifications vary from company to company. However, the common denominator is, a portion of the death benefit is available to a terminally ill person for a nominal fee, while they are still alive.

  • What does accelerated benefit rider mean?

    The death benefit is paid prior to death, hence the word “accelerated.”

  • What is an accelerated benefit rider for terminal illness?

    An accelerated benefit rider is usually automatically built into the policy and will pay a portion of the death benefit to the policy owner in case of a terminal illness of the insured.

  • What is the accelerated life benefit maximum?

    That would depend on the insurance carrier issuing the policy. The general range is between $250,000 to $1,000,000.

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