What is an accelerated death benefit?

An accelerated death benefit is essentially a feature included in some life insurance policies. It allows the policyholder to access a portion of the death benefit while they are still alive, typically in the event of a terminal illness or severe medical condition. This benefit can assist in covering medical expenses, living costs, or other financial needs that may arise due to the policyholder’s condition, thereby providing financial support during a challenging time.

This feature is particularly valuable because it offers financial flexibility in critical situations, allowing individuals to use their insurance in a way that best supports their circumstances before passing away. The amount accessed usually reduces the overall death benefit available for beneficiaries upon the policyholder’s death.

The other options pertain to different aspects of life insurance that do not accurately represent the function of accelerated death benefits. For instance, paying the full death benefit at policy inception doesn't align with the purpose of this benefit, which is activated under specific conditions. Similarly, clauses regarding benefits reduction for claims that are not made within a year do not reflect the nature of an accelerated death benefit but rather touch upon claim filing timelines. Lastly, a rider for accidental death benefits is distinctly separate from the concept of accelerated death benefits and pertains specifically to coverage in the event of death by accident.