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 Posted: Mon Feb 15, 2010 9:28 am Post subject: Life insurance accelerated death benefit (terminally ill) |
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A friend of mine has been diagnosed with a terminal illness. Is it really possible that he could collect a portion of his death benefit now?
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Midlifeplanner
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dgoldenz
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| Posted: Mon Feb 15, 2010 3:21 pm Post subject: |
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| Exactly, contact the agent or insurance company and get the provisions. There will most likely be a nominal charge (one time) of like 150 bucks, which you can take from the money you access from the policy. |
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BNTRS
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| Posted: Tue Feb 16, 2010 6:34 am Post subject: |
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| Yes, some carriers would pay you for such terminal illness under the accelerated death benefit rider. Again, some others would simply add it with the existing policy benefits. The additional charge would also be added to the cost of your death benefit. |
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steven
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| Posted: Wed Feb 17, 2010 6:33 am Post subject: |
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The accelerated benefits can be paid to your beneficiary through a lump sum or in installments. This would very much depend on the company policy.
The beneficiary would receive the balance which is due as and when the policy holder dies.
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anonymous00
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| Posted: Thu Feb 18, 2010 3:42 am Post subject: |
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Commonly, and in just about every state that I work in, there are a few different qualifiers that would allow the policyowner to access the death benefit prior to the death of the insured through the accelerated death benefits rider/provision.
Many carriers have a short list of what will qualify for advancement of the death benefit:
1. Terminally ill, usually with a life expectancy of 24 months or less;
2. A catastrophic medical condition which, without drastic medical intervention, would result in the death of the insured.
3. A medical condition which, without treatment, would result in a heavily shortened life expectancy.
4. Confinement in an eligible institution if the insured is expected to remain there for the rest of his life.
5. Any other situation deemed acceptable by the Commissioner of Insurance.
This is what the statute looks like in most states that I work in, so don't assume that only a terminal illness will qualify one for this benefit.
Finally, the IRS has recently ruled that in most cases, payment of a benefit under this rider will not result in a taxable event to the policyowner. There are certain exceptions; see your tax advisor for details. 
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InsTeacher
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| Posted: Thu Feb 18, 2010 5:47 am Post subject: |
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| While you're deciding about using your accelerated death benefit option, make sure you consider if the balance is enough to feed the financial requirements of your dear ones. They shouldn't be worrying about your funeral expenses. Also check out how these benefits would affect Medicaid. Your eligibility for Medicaid might be affected if the payment receipts are counted as 'income'. |
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steven
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| Posted: Fri Feb 19, 2010 10:05 am Post subject: |
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| Give serious consideration to the tax matters. At this moment it's not known whether the accelerated death benefits would be taxed or not. Generally, the federal govt. offers tax exemptions for the life insurance proceeds. |
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roddick
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| Posted: Fri Feb 19, 2010 10:50 am Post subject: Accelerated benefit rider |
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| Yes, your friend can collect a potion of his death benefit if she has accelerated benefit rider. That amount would later be deducted from the death benefit in the event of the death of the policy holder. Some policies also deduct the interest along with the paid out amount from the death benefit. |
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Veronica
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| Posted: Tue Feb 23, 2010 7:07 am Post subject: |
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| Quote: | | Generally, the federal govt. offers tax exemptions for the life insurance proceeds. |
Such benefits are excluded out of the gross income of tax payers. If you've received them in the form of compensation out of your accidental plan or health plan, then they'd be treated as your ordinary income and taxed accordingly.
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Juanita
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| Posted: Tue Feb 23, 2010 1:19 pm Post subject: |
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| Quote: | | Such benefits are excluded out of the gross income of tax payers. If you've received them in the form of compensation out of your accidental plan or health plan, then they'd be treated as your ordinary income and taxed accordingly. |
Since when?
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dgoldenz
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| Posted: Tue Feb 23, 2010 5:16 pm Post subject: |
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dgoldenz said:
Agreed. They're still in the midst of trying to figure this out tax-wise. In most instances, according to the IRS, it will be received tax-free. Not all.
Juanita said this:
| Quote: | | If you've received them in the form of compensation out of your accidental plan or health plan, then they'd be treated as your ordinary income and taxed accordingly. |
My assumption is that, even though the post wasn't exactly clear, is that she is considering payments under an accelerated death benefit rider that are used for LTC or for needs other than "death," so to speak. Accelerated death benefit riders will normally pay out for "mortality" and "morbidity" events (death and certain health related expenses; LTC, etc.).
If the benefit were to be paid prior to the insured's death as a mortality payment, it's received tax-free. If the benefit were to be paid out for a morbidity event, say LTC need, then the benefits would only be taxed if they (1) exceeded the daily IRS benefit for expense-incurred LTC or (2) if the policy actually paid more than the actual LTC expenses incurred by the insured.
Does that make sense?
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InsTeacher
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