What is an accelerated death benefit?
An accelerated death benefit lets the policyowner receive part of the death benefit while the insured is alive, on proof of a qualifying condition such as a terminal illness. Whatever is paid early reduces the amount paid at death.
Key facts for the exam
- It advances part of the death benefit during the insured's life on proof of a qualifying event, and reduces what is later paid at death.
- Qualifying conditions under the rider can include terminal illness, a specified disease, a chronic condition or a long-term-care need.
- For a terminally ill insured, federal tax law generally excludes the payment from income, subject to the exclusion's conditions.
- Under group life, the accelerated payment goes to the covered person while living and reduces the group death benefit later payable.
- A life settlement is different: selling the policy ends the family's protection, and the proceeds may be taxable or reachable by creditors.
The trap. It is not cash on demand. It pays only on proof of a qualifying condition, and it reduces the death benefit paid later.
How the exam asks about it
- What does an accelerated death benefit provision let a Texas policyowner do?
- What does an accelerated death benefit provide when its qualifying conditions are met?
- A terminally ill insured receives an accelerated death benefit. How does federal tax law generally treat the payment?
- A Texas group life plan includes an accelerated benefit. Who receives the accelerated payment?
- Qualifying events for accelerated death benefits under Texas regulation include which condition?
- A client considering a life settlement asks what he should weigh before selling. Which point is most important to raise?
Where it sits on your state's exam
| State exam | Share of exam | ≈ Scored questions | Outline section |
|---|---|---|---|
| Texas | 13% | 10 of 80 | Texas Statutes and Rules Pertinent to Life Insurance Only |
| Florida | 18% | 15 of 85 | Policy Riders, Provisions, Options, and Exclusions |
| Georgia | 19% | 15 of 80 | Policy Riders, Provisions, Options, and Exclusions |