Mar 25, 2012

Life Insurance Accelerated Death Benefit Riders

Many life insurance policies issued today include an Accelerated Death Benefit Rider . Under an Accelerated Death Benefit Rider, the carrier will pay part of the death benefit to a policy owner if the insured is proven to have an illness anticipated to result in the death of the insured within a specified time period. While the Internal Revenue code allows for life expectancies as long as 24 months, most carriers will trigger the rider only with a mortality period of less than 6 months. The amount of the life insurance death benefit available is determined by the company according to a predetermined formula or percentage of the policy face amount. In general the carriers work to keep their benefits tax free, but tax treatment and program requirements within a company by state.

For a young middle aged family with an upper middle class networth, we can often structure a program using a finite payment plan on a No Lapse Guaranteed Universal Life policy to guarantee both disaster management coverage while the couple is younger, and a guaranteed pool of long term care funding for their final years.

It is generally prudent to consult with a tax attorney and medicaid planning expert before taking an accelerated death benefit disbursement. Even just owning a policy with an accelerated benefit product might affect your eligibility for these programs. In addition, exercising the option to accelerate death benefits and receiving those benefits before you apply for these programs, or while you are receiving government aid, might affect your initial or continued eligibility. You should always check with the Medicaid Unit of your local Division of Medical Assistance and the Social Security Administration.

An accelerated death benefit is not a long-term care policy or nursing home insurance policy. The amount paid out isn’t guaranteed to cover medical, nursing home or other bills. The money you receive can be used for any purpose, and is not earmarked for actual patient care. Unlike conventional life insurance proceeds, accelerated benefits might be taxable.

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