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You might think that the only function of life insurance is to provide a payout when someone dies. But it can also provide money while you’re still living in certain situations. These payouts are often called living benefits.

“Companies typically offer some way to get at your money early,” says Byron Udell, CEO of AccuQuote, a national online life insurance agency. “Most people don’t even know they have the right.”

This right typically comes in the form of a life insurance rider called an accelerated death benefit. Most life insurance companies offer this benefit automatically with their policies, but not all do. So it’s important to find out whether the policy you’re considering or the one you have includes an accelerated death benefit.

It’s also important to understand how this benefit works if you need to use it.

What Is an Accelerated Death Benefit?

An accelerated death benefit lets you access a portion of your life insurance policy’s death benefit while you’re living.

Typically, you must be diagnosed with a chronic illness or terminal illness to trigger this benefit. You can then use the money to cover medical costs, long-term care costs or, truly, for whatever you want.

The AIDS epidemic sparked the creation of the accelerated death benefit concept, according to the National Association of Insurance Commissioners. It caught on about 20 years ago as lIfe insurance companies started offering accelerated death benefits for terminal illness in response to the growing life settlement market that allows individuals to sell their insurance policies to third parties, Udell says.

“Life insurance companies don’t like people shopping policies on the secondary market,” Udell says. So accelerated death benefits allowed policyholders to gain access to death benefits while living without having to sell their policies.

Most term and permanent life insurance policies now include an accelerated death benefit for terminal illness—often at no additional cost, Udell says. Accelerated benefits for chronic illness are more commonly offered as rider on permanent life insurance policies. Some insurers charge extra for this rider, but some do not. Read your insurance contract closely or ask your insurer if your policy includes benefits for terminal or chronic illness.

If you’re buying a life insurance policy, ask if these benefits are included or if you have to pay extra for them.

How to Access an Accelerated Death Benefit

How you access an accelerated death benefit depends on whether the benefit is for a chronic or terminal illness. It also will depend on the insurer’s requirements.

Accessing an accelerated benefit for terminal illness: To access the benefit, you’ll need a diagnosis from a medical doctor that you have a terminal illness, Udell says. Insurers typically require that you have a life expectancy of 12 months or less. Some allow a life expectancy of two years or less.

Accessing an accelerated benefit for chronic illness: To trigger a chronic illness benefit, a medical professional must certify that you have a chronic condition and cannot perform two of the six activities of daily living: bathing, continence, dressing, eating, toileting and transferring. You also can typically qualify if you have a permanent severe cognitive impairment and need substantial supervision.

How Accelerated Benefits Are Paid

There’s a lot of variation when it comes to how accelerated death benefits are paid. “Nothing is standard with this benefit,” says Nate Schelhaas, vice president and actuary of individual life at Principal Financial Group. “Every design is different.”

Some accelerated death benefits are paid in a lump sum. This is more common with a benefit for a terminal illness. Chronic illness payments are more likely to be monthly.

Some accelerated death benefit riders are straightforward because they pay a certain percentage of the death benefit, Schelhaas says. That percentage can range from 25% to 95% of the death benefit, depending on the insurer and policy.

And there can be a limit on the percentage of the death benefit that can be accessed monthly or annually for a chronic illness. For example, the insurer might allow you to receive a maximum of 25% of the death benefit per year up to four years.

Some insurers, such as Principal, use their own formula to determine the amount of accelerated benefits they will pay rather than a specified percentage of the death benefit. That formula may be based on your life expectancy at the time you want to access an accelerated death benefit, so it can be hard to pin down the specific amount you’ll receive until you actually need it.

Be aware that some insurers also charge an administrative fee or service charge to access an accelerated death benefit.

Once you start receiving an accelerated death benefit, you usually no longer have to pay your life insurance premium, Schelhaas says. In most cases, you won’t have to pay taxes on an accelerated death benefit payout.

Note that the death benefit that is paid to your beneficiaries when you die will be reduced by the amount you claim as an accelerated benefit. That’s why it’s important to carefully weigh whether it’s worth taking advantage of an accelerated death benefit before you do so.

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