Is an Accelerated Death Benefit Right for You? Accessing Life Insurance Early

Clock July 11, 2025

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Did you know that you may be able to access part of your life insurance policy’s death benefit while you’re still alive? If you have a qualifying medical condition, an accelerated death benefit (ADB) rider could provide the financial support you need during a difficult time. However, if you no longer need your coverage or can’t afford the premiums, or you don’t qualify for an ADB, there might be a better option: selling your policy for cash through a life settlement.

What Is an Accelerated Death Benefit?

An Accelerated Death Benefit (ADB) is a life insurance rider that allows policyholders to access a portion of their death benefit while they are still alive, usually when diagnosed with a terminal illness, chronic illness, or severe cognitive impairment. The amount you withdraw reduces the death benefit your beneficiaries will receive after your passing. Most life insurance policies include ADB riders at no extra cost, but some insurers may charge fees or higher premiums for this rider.

How Does an Accelerated Death Benefit Work?

When you qualify for an ADB, you can receive between 25% to 95% of your life insurance policy’s death benefit, depending on your insurer and the specific terms of your policy, according to NerdWallet. This payout can help cover critical expenses, such as:

  • Medical bills and treatments
  • Hospice or nursing home care
  • Daily living expenses
  • Travel or special experiences

However, keep in mind that this payout will reduce the amount your beneficiaries receive, and some insurers may charge administrative fees or apply interest to the amount you access.

When Can You Access an Accelerated Death Benefit?

To qualify for an ADB, you must meet specific medical criteria, usually involving a terminal illness, chronic illness, or critical illness. Here’s how it works:

  • Terminal Illness: You must have a life expectancy of 6 to 24 months or less, with a physician’s certification.
  • Chronic Illness: You must be unable to perform at least two ADLs (Activities of Daily Living) such as eating, bathing, or dressing for at least 90 days.
  • Cognitive Impairment: You suffer from conditions like Alzheimer’s or dementia and need constant supervision.

Why Sell Your Life Insurance Policy Through a Life Settlement?

If you no longer need your life insurance policy or can’t afford the premiums, a life settlement might be your best option. By selling your life insurance policy, you could receive a lump-sum cash payment that is often much greater than the cash surrender value or the amount you would receive through an ADB.

How Accelerated Death Benefits Compare to Other Options

If you’re facing serious health challenges, a life settlement could be a more advantageous option than accessing an accelerated death benefit. By selling your life insurance policy, you can receive a lump sum that may significantly exceed both the cash surrender value and the payout from an ADB, providing you with more financial flexibility.

Unlike ADBs, a life settlement doesn’t simply reduce the death benefit available to your beneficiaries; instead, it results in a change in policy beneficiaries from those you chose to those the new owner selects. If you’re no longer able to afford premiums or don’t need your policy, a life settlement could be a more viable option to accessing the value of your policy while you’re living. Learn more about the process in our guide to life settlements.

Financial Considerations: Accelerated Death Benefits vs. Life Settlement

Here’s a quick comparison between an Accelerated Death Benefit and a Life Settlement:

Feature

Accelerated Death Benefit

Life Settlement

Access to Cash

Access a portion of death benefit

Sell policy for lump sum

Impact on Beneficiaries

Reduces death benefit for beneficiaries

Your beneficiaries no longer receive a benefit

Eligibility

Terminal, chronic illness, cognitive impairment

Generally, the policyholder is at least 65 and has a policy of $100,000 or more

Administrative Fees

Possible fees and interest charges

No fees if the policy is sold directly, as opposed to selling through a life settlement broker, which charges a commission

Tax Implications of Selling Your Life Insurance Policy

When considering a life settlement, it’s important to understand the tax implications. Selling your policy can lead to certain tax liabilities depending on the amount you receive, especially if the sale price exceeds your policy’s premiums. It’s critical to consult with a tax professional before making this decision.

Additionally, when selling your policy, it’s important to understand how this might affect your tax obligations and any future government benefits like Medicaid or SSI. Understanding these implications ensures you’re making an informed decision that aligns with your financial goals.

 

Could Your Life Insurance Policy Help You Today?

Life settlements can be a game-changer if you need immediate access to cash but don’t qualify for an accelerated death benefit. At Lighthouse Life, we specialize in helping policyholders unlock the value of their life insurance policies to provide financial relief when it’s needed most.

Curious how much your policy might be worth? Use our free Life Settlement Calculator and get an estimate today.

 

Next Steps: Find Out if an Accelerated Death Benefit Is The Right Option For You

If you’re considering an Accelerated Death Benefit but are uncertain about its impact on your beneficiaries, a life settlement might provide a better financial solution. Contact us to learn more about how we can help you sell your policy for a lump sum that can improve your financial security now.

If you’d like to discuss your options, contact us at Lighthouse Life for a free, no-obligation consultation.

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