Policyowners can add extension of benefits riders to their policies with accelerated death benefit (ADB) riders to increase their coverage beyond their policies’ death benefits under the various forms of the ADB riders including benefits covering terminal, chronic, or critical illnesses and long-term care expenses. This rider differs from company to company as to its specific application.
Depending on the issuer, the extension of benefits rider either increases the total benefit amount available for terminal, chronic, or critical illnesses or for long-term care expenses (while the death benefit remains the same) or lengthens the number of months over which the insurer will pay benefits. In either case, benefit payments will reduce the available death benefit of the policy. However, some companies still pay a minimum death benefit even if the total of all accelerated benefit payments exceeds the policy’s death benefit amount.
Continuing from the example above under the “Long-Term Care Rider” section, if a policy’s extension of benefits rider increases the long-term care benefit (the death benefit–$87,000–remains the same) to three times the death benefit ($261,000), the monthly amount available for long-term care increases to $7,830. On the other hand, if the extension of benefits rider extends the length of time the monthly long-term care benefit is available, then the monthly payments ($2,610) are extended for an additional twenty-four to thirty-six months beyond the initial number of months (33.3) available.
Reproduced with permission. Copyright The National Underwriter Co. Division of ALM