Life insurance is commonly used to protect those who depend on you for financial security. If you die prematurely, life insurance can provide your loved ones with the financial support they will need when your gone. Also, as discussed in prior blogs, a hybrid life insurance and long term care policy can provide financial protection if you should become disabled and need long term care. Many life insurance companies also offer Accelerated Death Benefits (ADB) as a rider to a life insurance policy which allow an insured to receive a portion of the death benefit if the insured is terminally ill or suffers from a chronic illness.
These ADB riders are sometimes mistakenly promoted as a no or low cost substitute for long term care insurance. It is important to understand that there are important differences such as:
- A hybrid life insurance and long term care policy covers both temporary and permanent conditions, whereas an ADB rider ordinarily covers only a permanent condition.
- ADB riders are generally capped at a percentage of the policy’s death benefit or a specified maximum amount determined only at time a claim is made.
- ADB riders are meant to help alleviate end of life financial hardship and are not designed to replace long term care insurance.
As the old saying goes, “the devil is in the details”. Before choosing a life insurance policy with an ADB rider over a hybrid life insurance and long term care policy, be sure to understand exactly what you are purchasing. See an experienced elder law attorney before you make what could be a critical mistake.