What is an Additional Death Benefit?
An additional death benefit is a feature of specific life insurance policies that stipulates that if the insured dies in a way that meets the outlined requirements (e.g., death before a certain age), the insurer will pay an additional sum of money to their beneficiaries.
The parameters of an additional death benefit
Life insurance with an additional death benefit functions just like any other form of life insurance. That means it sets a primary death benefit that the beneficiaries will receive when the insured dies, assuming the policy is in force at that time.
But unlike other life insurance policies, one with an additional death benefit also includes a clause laying out specific situations that could trigger the insurer to pay more to the policy beneficiaries. At its simplest, the additional death benefit is a clause that says that if something specific happens, the insurance provider will cut an additional check.
You pay more for life insurance with additional death benefit clauses.
Additional death benefits function a lot like accidental death clauses, which pay out an additional sum of money if you die suddenly from an accident.
Additional death benefit examples
It’s most common for people to buy life insurance with an additional death benefit that comes into play up to a certain age. You might buy a policy with an additional death benefit that will get paid out if you die before age 40, for example.
The additional death benefit clause of your policy can give you peace of mind that if you pass away during certain important time periods (e.g., before your mortgage is paid off, before your children are grown), your beneficiaries will get more money to handle the challenges that arise.
How additional death benefit clauses work
Generally, you can choose the terms of your additional death benefit from within the options offered by your insurer.
Specifically, you’ll choose the size of the additional death benefit and the parameters around what activates it.
As far as size goes, the additional death benefit can be very sizable. It’s relatively common for this benefit to be somewhere between half and the full amount of the policy’s primary death benefit. If you have a $1 million policy, for example, your additional death benefit might pay between $500,000 and $1 million.
You also need to nail down the terms of the additional death benefit. Generally, the less likely it will be to apply, the less you’ll pay in additional premiums. As an example, if you set the additional death benefit to only apply for the next five years of your life, the policy will likely cost less than if you choose an additional death benefit clause that’s active for the next ten years.
Like primary death benefits, your beneficiaries may receive the additional death benefit as a lump-sum payment or an annuity.