Life Insurance with Living Benefits: Paying for Cancer Treatments and Other Major Illnesses

Life insurance is designed to provide financial security for your loved ones after you pass away. But what if you could access a portion of your death benefit while you're still alive? Better coverage starts here and that’s where an Accelerated Death Benefit (ADB) comes in. This valuable feature, offered in many life insurance policies, allows policyholders to access part of their death benefit early if they are diagnosed with a serious illness or medical condition. Rather than waiting until after death for loved ones to receive financial support, an ADB provides funds when they are needed most—during treatment and recovery. Medical bills, household expenses, and daily costs can pile up quickly, especially if the illness prevents you from working. By utilizing an accelerated death benefit, policyholders can relieve financial stress, focus on their health, and avoid the fear of losing their home or falling behind on critical expenses. It’s a lifeline that ensures you and your family maintain financial stability during life’s most challenging moments. Let’s explore how it works and why it might be an important option for you.

What Is an Accelerated Death Benefit?

An Accelerated Death Benefit (ADB) is a rider or provision in a life insurance policy that allows policyholders to access a portion of their death benefit if they are diagnosed with a qualifying illness. These funds can be used for medical expenses, long-term care, or any other financial needs, providing much-needed relief during a difficult time.

Qualifying Conditions for Accelerated Death Benefits

The specific conditions that allow you to access an ADB vary by policy, but they typically include:

• Critical Illness – Conditions such as cancer, heart attack, stroke, kidney failure, or major organ transplants may qualify you to receive accelerated benefits.

• Chronic Illness – If a physician certifies that you are unable to perform at least two activities of daily living (ADLs) (bathing, dressing, eating, transferring, toileting, and continence) for an extended period, you may be eligible.

• Terminal Illness – If you are diagnosed with a terminal illness and given a limited life expectancy (usually 12 to 24 months), you can often access a larger portion of your death benefit early.

How Much of the Death Benefit Can You Access?

The amount you can access through an ADB depends on the policy and the qualifying illness. Generally:

• Critical illness claims may allow you to receive up to 25% of your total death benefit per occurrence, typically capped at a certain amount per claim.

• Chronic illness claims may allow you to access a percentage of your policy's death benefit annually, often between 5-24% per year, depending on the severity.

• Terminal illness claims typically allow policyholders to access up to 90% of the death benefit, with a maximum cap based on policy terms.

Whatever amount you take out while you're alive is deducted from your final death benefit, meaning your beneficiaries will receive a reduced payout after you pass away. Your monthly life insurance premium is usually reduced after you access an accelerated death benefit, since the total death benefit amount is now lower. 

How Can You Use the Accelerated Funds?

One of the biggest advantages of an ADB is flexibility. The funds can be used for anything you need, including:

• Covering medical expenses like hospital stays, medications, or treatment not covered by insurance.

• Paying for in-home care or nursing home costs.

• Reducing financial stress by covering household expenses, mortgage payments, or other debts.

• Allowing a family caregiver to take unpaid time off work to provide care.

• Using the funds for quality-of-life choices, such as a final vacation or spending meaningful time with loved ones.

Are There Costs or Downsides to Accelerated Death Benefits?

Most life insurance policies include accelerated death benefits at no additional cost when the policy is issued. However, there are some key things to keep in mind:

• Reduced Death Benefit – Any amount taken out through an ADB is subtracted from the total death benefit, leaving less for your beneficiaries.

• Potential Fees – Some policies charge administrative fees when accessing benefits, especially for chronic or terminal illness claims.

• Impact on Other Benefits – Receiving an accelerated benefit may affect eligibility for certain government assistance programs, like Medicaid.

• Tax Considerations – While ADBs are generally tax-free if used for qualified medical expenses, you should consult a tax professional to understand potential implications.

Who Should Consider an Accelerated Death Benefit?

Anyone with a life insurance policy should check if their plan includes an ADB rider. This feature is especially important for those with a family history of serious illnesses, as they are more likely to need financial assistance during treatment. Facing a critical illness often means mounting medical bills, lost wages, and additional caregiving expenses. Having access to your life insurance benefits early can help ease financial stress, ensuring that you can focus on treatment and recovery without worrying about how to pay your bills. Without this option, many people struggle to cover mortgage payments, utilities, or other daily expenses while undergoing treatment. An ADB can provide much-needed relief, giving you financial flexibility when you need it most.

How to Access an Accelerated Death Benefit

If you experience a qualifying medical condition and need to use an accelerated death benefit, the process usually involves:

1. Physician Certification – A doctor must confirm your diagnosis and prognosis in writing.

2. Submitting a Claim – You'll need to file a request with your insurance provider, including necessary medical records.

3. Review and Approval – The insurance company will review your claim and determine the amount eligible for acceleration.

4. Receiving Payment – If approved, you will receive a lump sum or installment payments based on your policy terms.

Final Thoughts: A Valuable Safety Net

An Accelerated Death Benefit is a powerful feature in many life insurance policies that provides peace of mind during difficult times. Whether you face a chronic, critical, or terminal illness, having access to part of your life insurance benefit while still alive can ease financial burdens and allow you to focus on what matters most.

If you’d like to learn more about life insurance policies that include accelerated death benefits, contact a local agent today to explore your options. Better coverage starts here, and we’re here to help you find the right policy for your needs. At Utah Avenue, our experienced agents can guide you through your options, get you a personalized quote, and assist you with the application process—making it easy to secure the financial protection you deserve.