What is an accelerated death benefit?

An accelerated death benefit is a provision within a life insurance policy that allows the policyholder to access a portion of the death benefit while still alive, under certain conditions, typically related to terminal illness, critical illness, or chronic illness. This feature is particularly valuable for individuals facing serious health challenges, as it provides them with funds to cover medical expenses, living costs, or any other financial needs during their illness.

The mechanism works by enabling the insured to receive part of the anticipated death benefit, thereby offering financial relief in times of need. When the insured passes away, the remaining amount of the death benefit is paid out to the beneficiaries, minus the amount that was accessed through the accelerated death benefit. This provision reflects the understanding that in certain situations, having immediate access to funds can significantly impact the quality of life in challenging circumstances.

This characteristic distinguishes accelerated death benefits from other features or provisions, such as premium reductions for terminally ill policyholders, which do not involve accessing the death benefit while alive, or enhancements to the death payout based on age, which does not provide any liquidity to the policyholder while they are alive.