What Is an Accelerated Death Benefit?
An Accelerated Death Benefit (ADB) is a special feature included in some life insurance policies. It allows a policyholder to access part of their death benefit while they are still alive. Normally, life insurance is designed to provide a financial payout to beneficiaries after the policyholder passes away. But when a policy includes an ADB rider, it offers early access to funds—especially helpful if the insured is diagnosed with a terminal or chronic illness.
Also known as a “living benefit” or “terminal illness benefit,” the ADB provides a lump sum payment that can ease the financial burden of serious illness. It’s often used to help pay for things like long-term care, medical bills, or other end-of-life expenses.
It’s important to understand that the money received through an ADB is deducted from the policy’s total death benefit. This means your beneficiaries will receive a smaller payout after your passing. Still, the ADB provides valuable financial flexibility when it’s needed most, showing just how important a well-structured life insurance policy can be in your overall financial planning.
What Is the Accelerated Death Benefit ADB / Living Benefit Rider?
The ADB is an insurance rider, or add-on, that gives the policyholder early access to a portion of their life insurance benefit. This rider is available on many types of life insurance and is specifically designed to help relieve financial stress when the insured is facing a serious illness.
Many insurance companies now include this rider as a standard feature in their policies. However, the exact amount you can access varies by provider and policy. In general, policyholders may be able to receive between 50% and 80% of the policy’s value before death.
Who Qualifies for an Accelerated Death Benefit?
Eligibility for ADB usually depends on the policyholder’s medical condition. You may qualify for an accelerated payout if any of the following apply:
You’ve been diagnosed with a terminal illness, with a life expectancy between 6 months and 2 years (varies by policy).
You have a chronic illness that prevents you from performing daily living activities like bathing, eating, or dressing.
You are undergoing treatment for a critical illness such as cancer or organ failure.
You require long-term care services.
You are elderly and need support through private care services or a nursing home.
When these kinds of health issues arise, a life insurance policy with an ADB rider can provide financial support—offering peace of mind during a challenging time.
How Does an Accelerated Death Benefit Work?
When your policy includes an ADB rider, you may be able to receive a portion of your life insurance benefit before you pass away. This is especially useful if you’re facing high medical expenses or need long-term care.
The funds you receive can be used for:
Hospital or medical bills
Home healthcare
Hospice care
Living expenses
Other personal needs as your health declines
Most modern life insurance policies come with this feature automatically, but if yours doesn’t, you can often request to add it. If you qualify—due to a serious illness or reduced life expectancy—your insurance company will likely allow the early payout.
To qualify, you may need to show:
A diagnosis with a terminal illness
Inability to perform daily living activities
Dependence on long-term care or major medical treatments (like dialysis or an organ transplant)
Important Things to Consider
Before using an ADB, there are some important points to keep in mind:
The payout you receive now will reduce the amount your beneficiaries receive later.
It’s not a separate benefit—it’s an advance on your life insurance policy.
Some insurance providers may charge fees or reduce the amount slightly to cover administrative costs.
What Do Accelerated Death Benefit / Living Benefits Cover?
Accelerated Death Benefits (ADB), sometimes called Living Benefits, offer a financial lifeline if you’re diagnosed with a terminal or chronic illness. If you qualify, your insurance company will pay you a portion of your policy’s death benefit as a lump sum while you’re still alive. This money isn’t only for healthcare costs — it gives you a financial cushion to use however you need.
You can use these funds for many things, including:
Medical bills: Cover costs for doctor visits, prescriptions, hospital stays, or other treatments. This can reduce stress and help you focus on your health.
Long-term care: Pay for hospice, home care, or other extended care services to ensure you get the best support without worrying about the expenses.
Private caretaker costs: If you need help at home, ADB can pay for private caretakers, helping you stay comfortable and independent.
Debt repayments: Use the money to pay off debts like mortgages or loans, relieving financial pressure on you and your family.
The goal of ADB is to ease your financial burden during a difficult time, giving you more control over your money when you need it most.
Eligibility for Accelerated Death Benefits
You may qualify for Accelerated Death Benefits if your life insurance policy includes this feature and if you’re diagnosed with a serious illness that affects your life expectancy, quality of life, or requires long-term care. Most insurance companies require medical certification from a licensed doctor to approve your claim.
Here are common situations where policyholders qualify:
Terminal Illness: You have a terminal diagnosis and your life expectancy is less than two years (some insurers require six months or less).
Chronic Illness: You have a chronic illness and can’t perform at least two daily living activities, such as eating, bathing, dressing, walking, using the toilet, or controlling bladder/bowels.
Critical Illness: You have a serious illness like cancer, heart attack, stroke, or organ transplant that may not be immediately terminal but shortens life expectancy and causes high medical costs.
Long-term Care: You’re elderly or ill and need ongoing long-term care services.
Keep in mind: receiving ADB funds could affect your eligibility for government benefits like Supplemental Security Income or Medicaid. It’s a good idea to consult a financial or legal expert before applying.
Are Accelerated Death Benefit Payouts Taxed?
If you receive an Accelerated Death Benefit payout, tax rules depend on your situation. Generally, if your life expectancy is less than two years and you get the payment as a lump sum, the payout is not taxable.
However, if you choose to receive payments in installments, any interest charged on the unpaid amount may be taxable. Also, your estate’s total value, including your death benefit, could be subject to estate tax if it exceeds $11.7 million.
Tax laws can be complicated and change over time. If you think you may owe taxes on an ADB payout, it’s wise to consult a tax advisor to understand your obligations and find ways to reduce your tax bill.
Other Ways to Get Money From Your Life Insurance Policy
If you want to access cash from your life insurance, permanent policies like whole life or universal life build cash value over time. Term life policies don’t have cash value but may have other options.
Here are several ways to get money from your life insurance aside from Accelerated Death Benefits:
Withdrawals: You can take money out of your policy’s cash value, depending on your policy terms.
Policy Loans: You can borrow against your policy’s cash value, but you’ll pay interest and unpaid loans reduce your death benefit.
Use Policy as Loan Collateral: Your life insurance can secure a loan from a bank or lender.
Surrender Policy: You can cancel your policy for its cash surrender value, but this ends your coverage and may have tax consequences.
Sell Your Policy (Life Settlement): You can sell your policy to a third party for a lump sum, but the buyer becomes the beneficiary and collects the death benefit after your death.
Each of these options can help with expenses like medical bills or emergencies, but consider the long-term effects carefully before proceeding.
Withdrawing Cash from a Life Insurance Policy
If you’re facing financial hardship, withdrawing Cash Value from your life insurance policy can help — but it comes with trade-offs.
What to Keep in Mind:
- Your death benefit will shrink.
When you withdraw money, it reduces the amount your loved ones will receive when you pass away. If providing for your family is your main reason for having life insurance, this is a big deal. - Your premiums might go up.
After a withdrawal, it could cost more to keep your policy active. This means higher monthly payments, which could strain your budget. - There may be tax consequences.
Depending on how much you withdraw and the policy details, part of it could be taxed — and sometimes that tax bill is bigger than expected.
Bottom line:
Before you take money out, talk to your insurance provider and a tax advisor. They’ll help you understand the full impact and decide if this move is right for your financial goals and your family’s future.
Taking a Loan from Your Life Insurance Policy
If you have a permanent life insurance policy, you may be able to borrow money from the cash value. Think of borrowing from Cash Value of Life Insurance as tapping into your own savings — with a few important differences.
How It Works:
- Your policy builds cash value over time.
Part of the premiums you pay go into a “cash value” account that grows slowly. You can borrow against this money, often without a credit check. - You’ll pay interest on the loan.
Just like any loan, you’ll be charged interest. You don’t have to make regular payments right away, but the interest adds up over time. - It reduces your death benefit.
If you die before paying the loan back, the amount you owe (plus interest) will be subtracted from the money your beneficiaries receive.
Pros and Cons:
✅ You get fast access to funds
❌ It lowers the amount your family will receive
❌ If you borrow too much and the policy lapses, you could owe taxes
Bottom line:
Borrowing from Cash Value of Life Insurance can be a helpful option, but it’s not risk-free. Be sure you understand how it affects your coverage, your loved ones, and your long-term financial picture.
Using Your Life Insurance Policy as Collateral
In some situations, especially in business or large personal loans, you might be able to use your life insurance policy as collateral for a loan. This means the lender uses your policy’s death benefit as a type of guarantee.
Here’s how it works:
If something happens to you before the loan is paid off, the lender can collect what you owe from the death benefit. This ensures the loan is repaid even if you’re not around to do it.
Why some people do this:
Using a policy as collateral can make it easier to qualify for a loan, especially if your credit history isn’t perfect. It shows the lender you have an asset they can rely on.
But be careful.
- If you die before the loan is paid, your loved ones may receive less from your policy — or possibly nothing.
- There may be paperwork or restrictions from your insurance provider.
- This strategy can get complicated fast, especially when large amounts of money are involved.
Best move: Talk to a financial advisor or insurance expert before using your policy as loan collateral. They can help you understand the risks and decide if it’s worth it.
Surrendering Your Life Insurance Policy
Surrendering a life insurance policy means you cancel it and receive its Cash Surrender Value — the amount of money your policy has built up over time.
This is usually an option with whole life or universal life policies, which have a savings component built in.
How it works:
- You request to surrender the policy.
- The insurance company sends you a check for the cash value.
- They subtract any fees or unpaid premiums from the total.
Things to keep in mind:
- Taxes: If your cash value is more than what you paid in premiums, you could owe taxes on the gain.
- No more coverage: Once you surrender your policy, it’s canceled permanently. Your beneficiaries will no longer receive a death benefit.
The Cash Surrender Value of Life Insurance option might be useful if you no longer need life insurance coverage or if you urgently need cash and are not eligible for a life settlement
Selling Your Life Insurance Policy (Life Settlement)
If you have a life insurance policy you no longer need or can no longer afford, you might consider Selling Your Life Insurance to a third party in what’s called a life settlement.
How it works:
- You sell your policy to an investor or company for a lump sum cash payment.
- The buyer takes over the premium payments and becomes the new beneficiary.
- When you pass away, the buyer receives the death benefit — not your family.
Who qualifies:
- Most sellers are age 65 or older.
- Your policy should usually have a face value of $100,000 or more.
- Your health, policy type, and policy terms can also affect eligibility.
Why people choose a Life Settlement:
- You get a much higher payout than surrendering your policy.
- You no longer have to pay premiums.
- It’s a way to turn an unused asset into real cash — for medical costs, retirement, debt, or anything else.
Important to know:
Your family will not receive a death benefit. That value goes to the buyer. You should also consider possible tax implications and how this might affect Medicaid or other benefits.
A licensed Life Settlement Broker can help you understand your eligibility, estimate your policy’s value, and guide you through the process.
Navigating Your Options: What’s Right for You?
Deciding what to do with your life insurance policy is a personal decision. Whether you borrow from it, surrender it, or sell it, each option has its pros and cons.
Questions to ask yourself:
- Do I still need this life insurance policy?
- Can I afford to keep paying the premiums?
- Do I need cash now to cover major expenses?
- What are the tax consequences of my decision?
These choices can feel overwhelming — and that’s okay. You don’t have to figure it out alone.
Work with professionals:
A licensed Life Settlement Broker can walk you through each option, explain any risks or tax issues, and help you make the best decision for your situation.
Summit Life Settlements: Helping You Get the Most from Your Policy
Selling Life Insurance might sound complicated, but Summit Life Settlements is here to simplify the process and help you every step of the way.
We connect you with a wide network of licensed buyers through our secure Summit Life Marketplace — giving you access to competitive offers and real value for your policy.
Here’s how we help:
Fast, secure process with electronic document signing
Real-time updates and clear communication
Guidance from licensed experts who put your needs first
We don’t just process transactions — we help you take control of your financial future. If your life insurance policy no longer serves its original purpose, it might be worth far more than you think.
Discover your options. Get the facts. Feel empowered.
At Summit Life Settlements, we’re here to help you unlock the hidden value in your life insurance — with confidence, clarity, and care.
FAQs About Accelerated Death Benefits (ADB) / Living Benefits
1. What are Accelerated Death Benefits (ADB)?
ADB, also called Living Benefits, allow you to access a portion of your life insurance policy’s death benefit early if you have a qualifying illness. This can provide financial help while you are still alive.
2. Who is eligible for Accelerated Death Benefits?
You are usually eligible if you have a terminal illness (life expectancy less than 6-24 months), a chronic illness that limits your ability to perform daily activities, or if you need long-term care. Your eligibility depends on your policy terms and medical certification.
3. What illnesses or conditions qualify for ADB?
Common qualifying conditions include terminal illness, chronic illness (such as inability to eat, bathe, or dress without help), critical illness like cancer, heart attack, stroke, and needing long-term care.
4. How much money can I get from Accelerated Death Benefits?
You can typically receive a portion of your policy’s death benefit as a lump sum. The exact amount depends on your policy terms, your health condition, and how much death benefit you have.
5. What can I use the Accelerated Death Benefit money for?
You can use the funds however you wish — medical bills, long-term care, private caretakers, home modifications, paying off debts, or everyday expenses.
6. Does using ADB reduce my life insurance death benefit?
Yes. Any amount you receive from ADB will reduce the death benefit your beneficiaries get when you pass away.
7. Are Accelerated Death Benefits taxable?
Usually, ADB payouts are not taxable if you meet the terminal illness criteria (life expectancy less than two years). However, tax rules can vary, so it’s best to consult a tax professional.
8. How do I apply for Accelerated Death Benefits?
You need to notify your insurance company and provide medical documentation from a licensed doctor certifying your qualifying condition. The insurer will review and approve your claim if you meet the criteria.
9. Will taking Accelerated Death Benefits affect my eligibility for government benefits?
It can. Receiving a large lump sum might impact your eligibility for programs like Medicaid or Supplemental Security Income (SSI). Consult a financial advisor before applying.
10. Can I get Accelerated Death Benefits if I have a term life insurance policy?
Most term life policies do not offer Accelerated Death Benefits because they generally have no cash value. Check your policy details or talk to your insurer.
11. How quickly will I receive the Accelerated Death Benefit payment?
Once approved, payments are typically made within a few days to a few weeks, depending on the insurer’s process.
12. Can I still keep my life insurance policy after receiving Accelerated Death Benefits?
Yes, but your policy’s death benefit will be reduced by the amount paid out through ADB.
13. What happens if I recover or improve after taking Accelerated Death Benefits?
Receiving ADB does not affect your policy coverage beyond reducing the death benefit. If your health improves, your coverage remains active for the reduced amount.
14. Are there any fees or charges for accessing Accelerated Death Benefits?
Some policies may charge fees or interest on the amount you accelerate. Review your policy or speak with your insurer to understand any costs involved.
15. Should I consider Accelerated Death Benefits before selling my policy?
It depends on your financial needs and goals. ADB gives you funds while you’re alive but reduces your death benefit. Selling your policy (life settlement) gives you cash but transfers ownership. Talk to a financial advisor or broker to explore your best options.
