03 Jan How Do Accelerated Death Benefits Work for Veterans?
Accelerated benefit riders on life insurance plans provide policyholders with multiple types of coverage while they are still alive. If certain circumstances are met, they offer payments in addition to the usual death benefit and cash value to policyholders.
If you’re concerned about the lack of funds for end-of-life care or the financial security of your family, a benefit such as this may be something worth considering.
Discover how accelerated death benefits work and whether they’re right for you.
What Is an Accelerated Death Benefit
An Accelerated Death Benefit (ADB) allows the owner of a life insurance policy to collect a portion of their death benefit from their insurer before they die. The policyholder must be terminally sick, with a life expectancy of two years or less in most situations. While receiving benefits, they must continue to make their monthly policy payments.
There is no requirement to repay accelerated death benefits. Instead, when the death benefit is payable, the loan amount is reduced from the face value. Living benefits are another term for ADBs.
Related Article: What Is Life Insurance? A Guide for Veterans
Does the VA Have Accelerated Death Benefits
You can receive up to 50% of your VA policy’s death benefit (in $5,000 increments) if you are terminally ill and have nine months or fewer to live. The policy’s overall death benefit will be reduced by any cash withdrawn through the expedited benefits rider.
Accelerated death benefits are activated under specified situations, most commonly when death is imminent. If you want to spend money from your death benefit while you’re still alive, you must meet specific requirements. The following are situations that qualify:
- You are diagnosed with a terminal illness.
- An organ transplant is required for you.
- You’re in a long-term care facility.
- Your daily activities need assistance.
You must have a doctor or medical expert certify that you are terminally ill and your life expectancy is between 12 and 24 months (some providers may require a shorter life expectancy).
Many providers, however, offer accelerated benefits in the event of a severe sickness, chronic illness, or long-term care. It would be best to always inquire with your insurance company what kinds of living benefits they offer and how to apply.
How to Apply for Accelerated Death Benefits With the VA
Applicants for accelerated benefits must be insured service members or Veterans. No one else has the authority to request on their behalf. Only the covered spouse can apply for a terminally sick spouse.
Select the application form that corresponds to the type of insurance you have:
- Active duty or reserve service members should submit the form to the appropriate branch of service. They are required to complete some sections of the document.
- For veterans, ask your doctor to fill out their part of the forms and then mail the completed forms to
The Prudential Insurance Company of America
PO Box 70173
Philadelphia, PA 19176-0173
You may also fax the form to 877-832-4943.
For Family SGLI members, make sure to complete a Claim for Accelerated Benefits (SGLV 8284A).
In addition to your part of the application, another part must be completed by your physician.
Do Private Life Insurance Companies Provide Accelerated Death Benefits
Individuals with a life expectancy of two years or fewer are often eligible for accelerated death benefits from life insurance companies. If you’re terminally sick or diagnosed with an acute disease or terminal medical condition, your coverage may be extended to persons with a longer life expectancy.
Most ADBs are found in permanent life insurance plans such as whole life and universal life insurance. However, certain term life insurers may also include them or make them available for purchase. ADB riders are often offered when you purchase a new life insurance policy, but some carriers will allow you to add one to a current policy.
The chart below shows how much accelerated death benefits you can get from different insurance companies.
|INSURANCE COMPANY||ACCELERATED DEATH BENEFIT|
|AIG||50%, up to a maximum indicated in your policy|
|Banner Life||75% of the loan amount or $500,000, whichever is lower|
|Lincoln||50%, up to $250k|
|Prudential||70-100%, depending on illness or circumstances|
|Mutual of Omaha||80% or $1 million, whichever is less|
|Pacific Life||100% or $500,000, whichever is less|
|Symetra||75%, up to a maximum of $500,000|
**Keep in mind that certain states may have additional restrictions or may not have access to certain services.**
Check Policy for Riders
A life insurance rider adds extra benefits and protection alternatives to your life insurance policy in exchange for a minor increase in premium. Different riders give different benefits or protections, and your policy can include multiple riders.
Under a life insurance policy, the insured must have a short life expectancy or meet specified medical criteria to be eligible for an accelerated death benefit payout.
What Can I Pay For With the Accelerated Death Benefit?
You will receive the accelerated death benefit in a lump sum that you can use however you wish. Along with medical expenses, it can be used for various things, such as
How Much Does It Cost?
An accelerated death benefit rider is frequently inserted as part of a life insurance policy at no additional cost. As a result, you might acquire a life insurance policy with the rider and avoid paying higher premiums.
Some insurance companies and policies may ask you to pay an extra fee for this coverage. Even if the policy is free, you may have to pay costs if you use the rider to get payouts.
Related Article: How Much Life Insurance Do I Need?
Other Things to Consider Before Using Your Accelerated Death Benefit
Although living benefits can be a helpful addition to any life insurance policy, buyers should think about a few things before buying them. The following are some of the challenges that policyholders must deal with:
Taxes on the ADB
Benefits paid to terminally or chronically ill people usually aren’t subject to federal taxation if they meet specific criteria. For instance, a terminally ill person is classified in the federal tax code as having less than 24 months to live.
Consult a tax professional before exercising benefits because federal and state tax laws are subject to change, and tax laws linked to accelerated benefits are complicated.
Medicaid and Supplemental Security Income Eligibility May Be Affected
The government offers several assistance programs for low-income Americans, and receiving a lump sum from an accelerated death benefit could dramatically change your financial future. Therefore, you may no longer be eligible for government assistance.
Before making any decisions, talk to your caseworker or a financial advisor.
Beneficiaries Will Receive Less Benefits When You Die
Since accelerated death benefits are deducted from your policy’s death benefit, your life insurance beneficiaries will not get the total amount when you pass away. The payout can be taken at a reduced rate early if you want your loved ones to have enough money for a mortgage or other living expenses. For instance, instead of taking 80% of your death benefit, you can take 50%.
Is Using the ADB the Best Thing for You?
Despite limitations, these living benefits can help you organize your affairs and ease the financial strain on your family when you are sick.
Getting an accelerated death benefit is a no-lose proposition if your insurance company offers it as a built-in feature. If you require it as an add-on, consider the cost and ramifications before making your decision.
If you have adequate resources to cover unforeseen medical expenditures and expenses, you can avoid the rider.
Even though having accelerated death benefits can be comforting, not everyone will be able to utilize them. Below are a few alternatives that may be more appealing to you:
- Use the cash value of your permanent insurance coverage. Cash-value life insurance can be used as collateral if you have it for a long time. Those funds could help you pay for medical and living expenditures in any case. You could also surrender your policy and receive some money if you decide you no longer require coverage.
- Long-term care insurance is a wise investment. It can range from two years to a lifetime of long-term care bills, such as a nursing home or a health aide. Long-term care insurance may kick in if you become chronically or terminally sick, allowing you to avoid utilizing your life insurance or assets.
- Investigate the possibility of a life insurance settlement. You might be eligible to sell your life insurance coverage if you’re over 65. The most common purchases are universal life insurance contracts, which brokers usually handle.