What is an Accelerated Option?

In insurance, an accelerated option is a clause or provision in insurance contracts that allows a policyholder receive a portion of insurance benefits earlier than the stipulated time. When a policyholder applies for and receives an accumulated cash value of the policy sooner than they are payable, the policyholder has received accelerated benefits or partial benefits. Policyholders do not just receive partial benefits, there are certain conditions under which this is given. Accelerated option however allows a policyholder access some benefits of the policy earlier than they would ordinarily be available. In another vein, an accelerated option may allow an individual pay a policy using the accumulated cash value of policyholders.

How Does an Accelerated Option in an Insurance Contract Work?

A policyholder can apply for accelerated death benefits according to the provision of accelerated option. A living allowance (promotion benefits) is another life insurance policy whereby income is paid before the death of the insured. Certain conditions must be met before a policyholder can apply or receive an accelerated option. If the policyholder is critically ill or has a terminal disease or medical condition that would take their life within the years, an accelerated option can be received. The insurer deducts early payment from the policy and it is paid to the receiver. Many insurance companies derive benefits from accelerated options, the acquire premiums which are calculated as a percentage to compensate them for the loss of interest they incurred due to early payment. They can also request a service fee. It is also possible to add accelerated benefits or options without any additional fee. Although, accelerated options are often a feature of universal, permanent life insurance and other inclusive policies, some insurers make this provision based on timeline insurance contracts. Permanent life insurance policyholders can receive between 25% to 100% of the amount of the policy as accelerate death benefits in cases of valid health occurrences. However, this rate also vary from one type of policy to another. Also, while some insurance companies allow the insured to select a payment method, some already have pre-selected payment methods that insured persons can choose from.

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