Can I get life insurance money while I'm still alive?

Crawford Frazer

Normally, you get life insurance to help those who depend on you and still will after your death, such as your spouse and children. But what if you become terminally ill or can't take care of yourself? You might need that life insurance payout more than your beneficiaries do -- and you can get it if your policy has "accelerated death benefits" or "living benefits."

What are accelerated death benefits?

Accelerated death benefits let you get an early payout (before you die) from your life insurance company. To have such benefits, they must be part of your policy; you can receive the money only under certain circumstances.

Often, you can add accelerated death benefits in the form of a rider added to your policy and a rise in your premium, according to the Alabama Department of Insurance. Farmers Insurance, for example, offers a "Critical Illness Accelerated Benefit" rider that pays out if you get a serious illness specified in your policy.

Many permanent life insurance policies of more than $25,000 include them automatically, according to the American Council of Life Insurers (ACLI), and some term policies include them as well. How you receive the payments depends on your policy -- some pay a monthly benefit, while others give you the money in a lump sum.

Terms and conditions

As with any policy, the specific language in your life insurance policy (or accelerated benefit rider) will determine which conditions will allow you to take an early payout. Some circumstances may include:

  • A terminal illness, with death expected within a certain period. The period could be six months or less, as the Alabama Department of Insurance notes, or 24 months or less, as noted by ACLI.
  • Acute or catastrophic illness. This includes illnesses like AIDS or heart disease, or a dramatic procedure like an organ transplant.
  • The policyholder no longer can perform basic tasks like eating, bathing or dressing.
  • Permanent confinement in a nursing home.

Payout amounts

Your specific policy will determine how the payout works. According to ACLI, you can receive anywhere from 25 percent to 95 percent of your policy's death benefit. State laws may limit the total amount. Remember, the amount you receive as an accelerated payout will be deducted from the death benefit that your beneficiaries receive.

Accelerated benefits are not a replacement for health insurance or long-term care insurance. Accelerated benefits are meant to ease the burden of end-of-life financial hardship, and they're more limited in scope than health or long-term care insurance policies.