What is an accelerated death benefit rider?

Female doctor holding application form while consulting patient
Pressmaster / Shutterstock

With term life insurance — the much more affordable kind, which doesn’t include an investment component — the cash payout is normally only unlocked when you shuffle off this mortal coil.

But an accelerated death benefit rider will allow a terminally ill policyholder to receive some of the money while still alive. For example, you might be eligible to receive up to half the payout if you can show you have 12 months or less to live.

While there’s no legal requirement to include a “living benefit,” government bodies like the Financial Services Regulatory Authority of Ontario urge life insurance providers to offer them. Accelerated death benefits have become common ever since the AIDS crisis of the 1980s, when a whole community of ill individuals needed funds to help get them through their final days.

Because it’s considered a compassionate advance, there’s usually no charge to add this rider to a policy when buying term life insurance.

Unexpected vet bills don’t have to break the bank

Life with pets is unpredictable, but there are ways to prepare for the unexpected.

Fetch Insurance offers coverage for treatment of accidents, illnesses, prescriptions drugs, emergency care and more.

Plus, their optional wellness plan covers things like routine vet trips, grooming and training costs, if you want to give your pet the all-star treatment while you protect your bank account.

Get A Quote

How do you use it?

Family with two children standing  on the beach on sea coast
YanLev / Shutterstock

To claim the living benefit, a policyholder will need to produce a letter from a doctor proving their remaining lifespan falls within the threshold listed in their policy.

On top of that, insurance providers will typically require that the policy has been in place for a minimum number of years or have a set number of years left before it’s due to renew or expire, according to the brokerage PolicyAdvisor.

Once you’ve received the money, you can spend it however you wish — whether that’s paying down debt or taking a trip to Bora Bora.

Some common applications include:

  • Making yourself more comfortable in your final days, including renovating your home.
  • Creating memories with your family.
  • Paying for medical costs, including experimental treatments or procedures abroad.

And even if you don’t die within the expected timeframe, the insurance company won’t come knocking at your door to claw back the funds. That’s an outcome everyone’s happy with.

What other riders should you know about?

Horizontal shot of a senior couple discussing paperwork with the woman holding documents looks at her husband.
Juice Verve / Shutterstock

The accelerated death benefit is one of several lesser-known riders that can make a huge difference in a difficult time.

Many insurance providers offer long-term care riders, which will advance some of a claimant’s death benefit to cover the costs of a long-term care facility when they’re unable to continue living independently.

Another important rider offers parents the opportunity to insure their children under their policy. This child term rider provides a limited death benefit to help cover funeral expenses, counseling and other services for grieving families when a child passes away.

A single rider will cover all of the children in a family and can be tacked on at a minimal expense. To receive this coverage, the child won’t have to go through medical underwriting, though many insurance companies will ask a few questions to assess their insurability.

It’s true that these riders aren’t commonly used — partially because not enough people have life insurance in the first place. But when the cost of protection is so small, it’s worth taking a few minutes to ensure your family is covered.

Sponsored

Trade Smarter, Today

With CIBC Investor's Edge, kick-start your portfolio with 100 free trades and up to $4,500 cash back.

About the Author

Sigrid Forberg

Sigrid Forberg

Associate Editor

Sigrid’s is Money.ca's associate editor, and she has also worked as a reporter and staff writer on the Money.ca team.

What to Read Next

Disclaimer

The content provided on Money.ca is information to help users become financially literate. It is neither tax nor legal advice, is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Tax, investment and all other decisions should be made, as appropriate, only with guidance from a qualified professional. We make no representation or warranty of any kind, either express or implied, with respect to the data provided, the timeliness thereof, the results to be obtained by the use thereof or any other matter.