Accelerated death benefits (ADB) is an option available in some Canadian life insurance policies — and not in others. It varies by company, some companies offer it, some don't. If it's a feature that's important to you then make sure you go with a company that offers it. Note, in our online term life insurance quotes, we disclose what policies have this benefit and what companies don't. I'm pretty sure that we're the only place where you can get this information across multiple companies — I'm not aware of any other online life insurance quoting service that provides this information.
And just before I show you what it is, let me tell you what it is not — it is not Accidental Death Benefit (even though the acronyms are the same). Accidental death benefit pays an additional premium if you pass away as the result of an accident. That is not what Accelerated Death Benefits are.
OK, enough about what it's not. What is it?
Definition: A life insurance policy that includes Accelerated Death Benefits allows the policy owner to take out a loan while the insured is still alive. The loan is generally capped at 25% of the death benefit (may vary by company) to a maximum of $250,000.
OK, but there's a big condition on that loan. To qualify, you must have a life expectancy of a year or less. That doesn't mean you have cancer, or had a heart attack. It means you have a letter from your doctor asserting specifically that you'll be dead in less than a year. No ifs, ands, or buts. Under that condition, policies that have ADB will allow you to take out a loan.
Purpose of accelerated death benefits?
I'm not sure, and I'm not sure if anyone knows specifically. I think it's just offered on compassionate grounds. If we know your death benefit is going to be paid out in the short term, then maybe the companies offer it because there's no drawback and maybe it helps you and your family somehow.
Repayment
The benefit that is a loan. Any funds provided are paid back, with interest, from the death benefit when it is eventually paid out. If you have a $1MM death benefit and take advantage of a $250,000 Accelerated Death Benefit, then when you pass your beneficiaries will receive $750,000 less interest on the $250,000.
Claiming accelerated death benefits
To claim the benefit you'll need to complete a claim form. In addition, at that time, you'll need to provide a letter from your doctor showing a greatly reduced life expectancy, generally less than a year. These benefits are used so infrequently that my best advice is to just speak to the company at that time and have them guide you.
Why I don't personally think this is a concern
My arguement is that we're Canadians, and while we can — and likely will — argue about that, the fact is that if we're end of life we're unlikely to be faced with huge medical expenses. If this is a concern, and you want out of country medical treatment, then see our page on Critical Illness Insurance. If you're in the US and are in the hospital for an extended period of time, you might need hundreds of thousands of dollars to pay for medical treatment. We of course don't face that bill. So it's my opinion that the value of this benefit is minimal.
My opinion is backed by the fact that I have almost never seen this benefit used. Even when our clients have passed, they don't normally use this benefit.
Further, the one time I have seen it used, it was with a company that technically didn't offer the benefit at the time. Instead, the client asked, the company evaluated, and offered the benefit as an exception on compassionate grounds. So — even when I HAVE seen it used, it was with a company that didn't technically offer it. Ironic? Perhaps. But that's formed my opinion that I don't place much emphasis on the benefit, or prefer companies that have it over those that don't.
With that being said, that's my opinion not a recommendation. You should form your own opinion about this benefit and if it's important to you, select a company that offers it — and again, you can evaluate that using our online term life insurance quotes as we note companies that offer this feature, and those that don't.