Living Benefits

Background

Accelerated death benefits and viatical agreements are often called living benefits. They can help some people by providing additional funding for long-term services and supports.

Accelerated death benefits may be part of an existing life insurance policy or sold separately as a rider. They allow policyholders to access benefits before death in the case of a terminal illness or catastrophic or long-term care need. Payouts typically comprise a portion of the policy’s face value, up to 80 percent. But accelerated benefits have limitations. For instance, people with preexisting conditions may be unable to purchase an accelerated benefits rider after they have bought a life insurance policy. Also, payouts of accelerated benefits will reduce the amount available to beneficiaries when the policyholder dies.

People who no longer wish to keep a life insurance policy that has a cash surrender value or who are terminally ill can sell their policy to a life settlement or viatical settlement company for an immediate payout. Recently the market for such settlements has expanded to include terminally ill people with longer life expectancies and even healthy seniors. People with longer life expectancies typically receive a smaller percentage of the face value of the policy (see Chapter 11, Financial Services and Consumer Products: Financial Services—Investment and Securities Industry).

Living Benefits: Policy

Understanding the impact of accelerated benefits

In this policy: State

States should regulate accelerated death, life settlement, and viatical settlement benefits to ensure full disclosure of information to consumers on the effect of accelerating benefits, and should ensure that consumers receive fair actuarial compensation for the value of their life insurance