Texas General Lines — Life, Accident, Health and HMOHealth InsuranceHard
A life insurance policy includes an 'Accelerated Benefits' rider. Which of the following events would typically trigger the payment of a portion of the death benefit to the policyowner while they are still alive?
- AThe policyowner needs a loan against the policy's cash value.
- BThe policyowner is diagnosed with a critical illness, such as cancer or heart attack.
- CThe policyowner needs long-term care for activities of daily living.
- DThe policyowner becomes totally disabled and unable to work.
Show answer & explanationAnswer & explanation
Correct answer: B. The policyowner is diagnosed with a critical illness, such as cancer or heart attack.
Accelerated benefit riders typically allow a portion of the death benefit to be paid out early upon the diagnosis of a specified critical illness, terminal illness with a short life expectancy, or sometimes chronic illness requiring long-term care. Among the options, critical illness is a common trigger.
Why the other options are wrong
- A. Taking a loan against cash value is a standard policy feature, not an accelerated benefit rider trigger.
- C. While some accelerated benefit riders cover chronic illness requiring long-term care, 'critical illness' is a more universally recognized trigger for this type of rider.
- D. Total disability is typically covered by a waiver of premium rider or disability income policy, not usually an accelerated benefit trigger.
Accelerated Benefits Rider
A rider on a life insurance policy that allows the policyowner to receive a portion of the death benefit while still living, under specific circumstances.
- Common triggers: terminal illness, critical illness, chronic illness
- Reduces the death benefit paid to beneficiaries
- Can help cover medical or long-term care expenses
Memory trick: Accelerated benefits are 'Advance' payments for 'Severe' health 'Crises'.