How do "accelerated benefits" affect a life insurance policy's death benefit?

Accelerated benefits refer to a provision in some life insurance policies that allows the policyholder to access a portion of their death benefit while they are still alive, typically in situations involving a terminal illness or severe medical condition. When a policyholder utilizes this feature, the amount of money received as an accelerated benefit is effectively an advance on the death benefit.

Therefore, the total death benefit available to beneficiaries upon the policyholder's passing is reduced by the amount of the accelerated benefit taken. For instance, if a policy has a death benefit of $100,000 and the policyholder accesses $20,000 in accelerated benefits, the remaining death benefit that the beneficiaries would receive is $80,000.

This mechanism is designed to provide financial support to the insured during a time of significant medical need, acknowledging that the funds can be utilized for treatments, care, or essential expenses. Hence, the correct understanding of accelerated benefits is that they lead to a decrease in the death benefit equivalent to the amount advanced.