Life Insurance Accelerated Death Benefit
If your accelerated death benefit claim has been denied, our life insurance attorneys can navigate the claims process and aggressively pursue financial compensation on your behalf.
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A life insurance policy pays benefits to the beneficiaries after the insured party (usually the policyholder) dies. However, policy benefits can be accelerated if they are paid directly to a chronically or terminally ill policy owner prior to his or her death. When a party receives such a payout, it is called an “accelerated death benefit” or a “living benefit.” This benefit allows the owner of a life insurance policy to receive a portion of his or her death benefit from the insurance company in advance of his or her death. In most cases, the policyholder must be terminally ill to receive such a benefit. However, as discussed below, chronically ill individuals who meet certain requirements may also be eligible.
Ordinarily, a policy owner must continue to make monthly payments on his or her policy while receiving accelerated benefits. Life insurance accelerated death benefits, however, do not need to be repaid. Unfortunately, life insurance companies often deny these claims without good cause. If you have been denied such a benefit, contact an experienced life insurance attorney as soon as possible to discuss your situation.
Eligibility
To receive an accelerated death benefit payment, an individual must be either terminally or chronically ill. However, some insurers may consider other types of conditions eligible. In most cases, to access such a benefit for a terminal illness, the claimant must submit certification from a health care provider that he or she is suffering from a terminal condition. Most insurers require that an insured party have a life expectancy of 12 months or less to access accelerated benefits. However, some insurance companies allow a life expectancy of two years or less.
To obtain a chronic illness benefit, a medical professional must certify that the insured party has a chronic condition and cannot perform two of the following six activities of daily living:
- Bathing
- Continence
- Dressing
- Eating
- Toileting
- Transferring
Pros and Cons
As noted above, terminally (and sometimes chronically) ill individuals who have life insurance policies may receive a portion of their death benefit in advance of death. Such benefits may be used for any purpose the recipient chooses, including nursing home, assisted living, in-home, and hospice care. When a policyholder receives accelerated death benefit payments, the beneficiaries of the life insurance policy will still receive a death benefit, though it will be reduced by the amount of the accelerated benefit. The primary advantage of receiving a living benefit is that the policyholder collects a portion of his or her death benefit prior to death. Clearly, this is beneficial if the policyholder is in need of funds to help pay for his or her end-of-life needs.
One drawback to receiving an accelerated benefit, however, is that the amount of funds available to the beneficiaries of the plan will be reduced when the insured party passes away. In addition, a recipient must be terminally or chronically ill to file such a claim, thereby limiting this option to a small percentage of life insurance policyholders.
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 differs from the opinion of the insured party’s doctor regarding life expectancy. If this is the case, and the independent physician states that the insured party’s life expectancy is beyond a certain length, the insurance company will deny the claim.
When a person’s accelerated benefit claim is denied, legal representation is often necessary. Although the process of filing a claim for living benefits may seem relatively straightforward and easy, this all changes when a denial is involved. In fact, as even minor mistakes during the claim process can result in a denial, it is advisable to seek legal assistance before even filing a claim. Therefore, whether you are planning on filing a claim or your claim has been denied, you should contact us as soon as possible for assistance.
Contact an Attorney for Assistance
If you require assistance with a claim for accelerated benefits, our life insurance lawyers are here to help. At Life Legal, we understand the confusion associated with these types of claims. So, when you come to us for assistance, we will help you understand your life insurance rights and assist you in filing a claim by gathering all necessary documents and required medical records. In addition, if your claim has been denied, we will fight hard to obtain your life insurance accelerated death benefit payment, keeping you fully apprised of our progress along the way.
Life Legal’s founding partner Taylor Gerchman is dedicated to helping those who require legal services related to death benefits, life insurance, critical and chronic care benefits, and accidental death and dismemberment insurance. When you come to us for help with your claim, we will navigate the process and aggressively pursue financial compensation on your behalf. With Life Legal on your side, you can rest assured that your claim is in good hands. 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 death of the policy owner. However, when a policy owner is terminally ill, payout of policy benefits can be accelerated to before the owner dies. Such benefits are commonly known as “accelerated” or “living” benefits.
Accelerated benefits are paid in a number of ways, and there are many factors that determine the manner in which such benefits are distributed. Sometimes, benefits are paid 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—as noted above, living benefits are sometimes available to those with chronic illnesses—payments are more likely to be made monthly.
Depending on the insurer and policy, the amount received by a policyholder can range from 25 to 95 percent of the death benefit. In addition, there is often a limit on the percentage of the death benefit that is accessible monthly or annually for a chronic illness.
Some insurers, rather than paying a specified percentage of the death benefit, will use their own formula when determining the amount to be paid to a policyholder. Some formulas are based on an insured party’s life expectancy at the time of the claim, and others are based on other factors. Some insurers also charge an administrative fee or service charge to access an accelerated benefit.
Finally, 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.
Certain medical conditions can trigger a person’s eligibility for early payment of all or a portion of his or her 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. In order to assess your eligibility for benefits, you should contact an experienced attorney for assistance.
In general, living benefits range from 25 to 95 percent of a life insurance policy’s death benefit. The amount of the payment available to the policyholder depends on the policy’s face value, the terms of the contract, and the laws of the applicable state. Some life insurance companies allow an insured party to accelerate 100 percent of a policy’s face value, but they will reduce the amount of the benefit to compensate for the interest that they lose as a result of the early payout. The amount of the benefit will also be reduced by any outstanding loans against the life insurance policy. In addition, there is sometimes a small service charge associated with an accelerated benefit. Therefore, if you are considering filing a claim, it is recommended that you first request a quote from your insurer.
In most cases, living benefits are not subject to federal income taxes. Under federal law, a person who has 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 are a recipient of living benefits.
Please note: The attorneys at Life Legal are not tax attorneys and do not provide tax advice. A separate tax professional should be contacted for any information regarding tax questions.