When comparing accelerated death benefit amounts available on life insurance policies, it is important to understand the 2 primary methods of calculating the amount that can be accelerated:
Lien Approach VS Discount Approach
- Benefit Amount is predetermined for qualifying conditions
- Death benefit reduced by accelerated amount
- Policy premium remains the same
- Benefit amount depends on life expectancy and severity of the condition
- Death benefit recalculated and reduced in greater proportion than accelerated amount which may be less than needed and lead to no remaining death benefit.
- If death benifit remains, policy premium reduced.
Consider a situation where a healthy, 40 year old man who does not use tobacco is issued a $500,000 policy. At age 42 he is diagnosed with a critical illness. The competitor’s product has a range from $2,500 to $381,321. If he receives any accelerated death benefit, there is no remaining coverage for his heirs. With Ameritas, he is eligible for a $125,000 accelerated death benefit and he will still have life insurance coverage to protect his heirs.
$500,000 Initial Death Benefit
Accelerated Benefit Paid
Remaining Death Benefit