Life Insurance Accelerated Death Benefit
An accelerated death benefit can be a critical financial lifeline for those with a terminal or chronic illness. If an insurer has denied your claim for such benefits, the life insurance attorneys at Life Legal will fight tirelessly to help you obtain the proceeds you need and deserve.
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In most cases, the proceeds of a life insurance policy go to the insured’s beneficiaries after they pass away. Sometimes, however, a policy’s benefits may be desperately needed by an insured who is terminally or chronically ill. When a policy owner receives such a payout while still living, it is called an “accelerated death benefit” or a “living benefit.” This benefit allows the life insurance policy owner to receive a portion of the death benefit from the insurance company before their death.
Despite policy language providing for accelerated death benefits to qualified insureds, life insurers often deny these claims wrongfully or without good cause. This can add even more stress and worry to insureds and their loved ones struggling with the financial, practical, and emotional challenges of a terminal or chronic illness. When that happens, the experienced life insurance attorneys at Life Legal stand ready to fight back. We use our powerful combination of unmatched life insurance experience and passionate advocacy to get our clients every dollar in accelerated death benefits they are owed.
Who Is Eligible To Receive Accelerated Death Benefits?
To be eligible to receive an accelerated death benefit payment, the policy must specifically provide for such a benefit and the insured usually must be either terminally or chronically ill, though some insurers may consider other types of conditions that qualify for accelerated benefits.
In most cases, a claimant seeking accelerated death benefits for a terminal illness must submit certification from a health care provider confirming they suffer from such a condition.
Most insurers require an insured party to have a life expectancy of 12 months or less to qualify for accelerated benefits, although some insurance companies allow a life expectancy of two years or less.
To obtain benefits for a chronic rather than terminal illness, a claimant must usually provide certification from a medical professional that the insured party has a chronic condition and cannot perform at least two of these six activities of daily living:
- Bathing
- Continence
- Dressing
- Eating
- Toileting
- Transferring
Why You Should Claim Accelerated Death Benefits – And Why You Shouldn't
The primary advantage of receiving a living benefit is that the policyholder obtains funds to pay for their care, treatment, and other end-of-life needs. Once they receive accelerated death benefits, the insured can use those funds for any purpose they choose, including nursing home, assisted living, in-home, and hospice care. This can relieve the insured and their family members of a significant financial burden and ensure the remaining days of the insured’s life are as comfortable as possible.
One drawback to receiving an accelerated benefit, however, is that the insurer will reduce the amount of funds available to the policyholder’s beneficiaries when the insured passes away. If the policyholder’s primary concern is providing the maximum amount for the financial well-being of their beneficiaries, drawing down on the policy proceeds runs contrary to that objective and may weigh against seeking an accelerated benefit.
Accelerated Death Benefit Claim Process
When a life insurance company receives an accelerated benefit claim, it hires an independent healthcare provider to review the insured party’s medical records and write an opinion regarding the insured party’s life expectancy. Sometimes, the independent medical consultant’s opinion regarding life expectancy differs from that of the insured party’s doctor. If this is the case, and the insurer’s independent physician states that the insured party’s life expectancy is beyond a certain length, the insurance company will deny the claim.
Why You Should Hire an Attorney When Seeking Accelerated Death Benefits
When an insurer denies a person’s accelerated benefit claim, the process of challenging that decision can be complex, confusing, and frustrating. Even filing the initial claim is perilous, as the most minor mistake can lead to a denial. Therefore, whether you are planning to file a claim or your claim has been denied, you should contact Life Legal as soon as possible for assistance.
Our lawyers do one thing: fight life insurance companies when they deprive our clients of the benefits and proceeds they deserve. When you meet with our life insurance lawyers for your free initial consultation, we will help you understand your life insurance rights and explain your options. If we believe you have a viable claim for accelerated death benefits or your claim was wrongfully denied, we will pursue every avenue possible to get you those proceeds. Critically, you will pay Life Legal nothing in attorney’s fees until and unless we recover money for you.
Please contact us today to schedule a free consultation with one of our talented life insurance attorneys.
Accelerated Death Benefits FAQs
A life insurance policy ordinarily pays benefits to the beneficiaries after the policy owner’s death. However, when a policy owner is terminally (and sometimes chronically) ill, they can ask the insurer to accelerate the delivery of policy proceeds before they pass away. Such benefits are commonly known as “accelerated” or “living” benefits and are available only under certain policies. A policy owner can reference their policy documents to determine if accelerated death benefits or chronic illness benefits are available.
Insurers pay accelerated benefits in a number of ways, and many factors determine how they will distribute such proceeds. Sometimes, an insurer will pay benefits in a lump sum. This is most common when the insured party is suffering from a terminal illness. In other situations, such as those involving a policyholder with a chronic illness, payments may be made monthly. Either way, an experienced life insurance lawyer will help you get paid in the manner you prefer.
Certain medical conditions can trigger an insured’s eligibility for early payment of all or a portion of their policy’s proceeds, including terminal illness and chronic illness. However, every insurance policy is different, and some insurers may offer benefits to insured parties who suffer from acute illnesses and catastrophic illnesses. In addition, depending on the policy, such benefits may be available to insured parties who require long-term care or are permanently confined to a nursing home. To assess your eligibility for benefits, you should contact an experienced attorney for assistance.
Depending on the insurer and policy, the amount received by a policyholder can range from 25 to 95 percent of the death benefit. The proceeds available to the policyholder depend on the policy’s face value, the terms of the contract, and the laws of the applicable state. There is also often a limit on the percentage of the death benefit that is accessible monthly or annually for a chronic illness. Rather than paying a specified percentage of the death benefit, some insurers will use their own formula when determining the amount they will distribute to a policyholder, such as basing it on an insured party’s life expectancy at the time of the claim.
When an insured party receives a living benefit, the amount paid to the policy’s beneficiaries will be reduced by the amount claimed by the policyholder as an accelerated benefit. The insurer will also deduct any outstanding loans against the life insurance policy from the final benefit amount. In addition, a small service charge is sometimes associated with an accelerated benefit. Therefore, if you are considering filing a claim, we recommend requesting a quote from your insurer first.
In most cases, living benefits are not subject to federal income taxes. Under federal law, a person with 24 months or less to live does not have to pay taxes on such benefits. People who are chronically ill are also usually exempt, but they may have to requalify for the exemption each year. However, given the complexity of federal and state tax laws, it is advisable to consult with a financial professional if you receive living benefits.
Please note: The attorneys at Life Legal are not tax attorneys and do not provide tax advice. You should contact a separate tax professional for any tax questions.