Acceleration Life Insurance - Definition
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Back To: INSURANCE & RISK MANAGEMENT
Acceleration Life Insurance Definition
Acceleration Life Insurance is an insurance policy or plan that allows the holder of the policy to receive a percentage of the amount of the policy before their death. Usually, it is a potion of death benefits received by a holder before their death. Typically, a policy holder can receive between 25%-50% of the total amount in the policy before their death, this percentage can also be 100% depending on the severity of the condition. However, it is important to know that accelerated life insurance does not just occur, it is used in cases of serious injuries, long-term illnesses and medical emergencies that the policy holder faces. Acceleration Life Insurance is also called accelerated death benefit.
A Little More on Life Insurance Acceleration
Accelerated Life Insurance started in the 1980s when AIDs was quite rampant, it was introduced to relieve AIDs patients from economic pressures that they face. Policyholders who need an organ transplant or have illnesses that can terminate their lives within two years can access this provision. Policyholders that suffer from serious illnesses and intractable diseases have the right to accelerated life insurance or accelerated death benefits. It is a percentage of death benefits received by the policyholder to cater for medical bills in cases on emergencies of long-term health care bills. 25% to 100% of compensation can be received by a policyholder before their death, accelerated benefits are tax-exempt.
Example of an Acceleration of Life Insurance
The illustration below is important for a better understanding of how an accelerated life insurance works; If an individual has a life insurance worth $1,000,000 and the individual was diagnosed with a terminal illness, an intractable disease or a medical condition that can terminate his life within a short while, the policyholder can opt for an acceleration of life insurance. Once this claim is submitted, the policyholder can get 25% - 50% of the original amount of the policy which is $1,000,000. If 50% is given as the accelerated death benefit, that will be $500,000, then the new face value of the policy will be $500,000.
References for Acceleration Life Insurance
Academic Research for Acceleration Life Insurance
The benefits of a secondary market for life insurance policies, Doherty, N. A., & Singer, H. J. (2003). Real Property, Probate and Trust Journal, 449-478. Angels of Mercy or Greedy Capitalists-Buying Life Insurance Policies from the Terminally Ill, Schultz, D. M. (1996). Angels of Mercy or Greedy Capitalists-Buying Life Insurance Policies from the Terminally Ill. Pepp. L. Rev., 24, 99. Life insurance, imminent death and accelerated benefits, Huntley, K. C., Poe, S. L., & Thornton, J. H. (1994). Journal of Financial Service Professionals, 48(3), 84. Long-term care and nursing home coverage: are adult children substitutes for insurance policies?, Mellor, J. M. (2001). Journal of Health Economics, 20(4), 527-547. The relationship between insurance and economic development: 85 empirical papers for a review of the literature, Outreville, J. F. (2013). Risk Management and Insurance Review, 16(1), 71-122. Analysis of accelerated death benefit claims at a Japanese life insurance company, Kobayashi, M., & Kudomi, H. (2002). JOURNAL OF INSURANCE MEDICINE-NEW YORK THEN DENVER--, 34(2), 94-99. Money for life: Regulating the viatical settlement industry, CritesLeoni, A., & Chen, A. S. (1997). Money for life: Regulating the viatical settlement industry. Globalization and US wages: Modifying classic theory to explain recent facts, Haskel, J., Lawrence, R. Z., Leamer, E. E., & Slaughter, M. J. (2012). Journal of Economic Perspectives, 26(2), 119-40. Insurance market dynamics: between global developments and local contingencies, Cummins, J. D., & Venard, B. (2008). Risk Management and Insurance Review, 11(2), 295-326. The Enforcement of Acceleration Clauses in New York, McManus, E. J. (1962). The Enforcement of Acceleration Clauses in New York. NYLF, 8, 466.