An accelerated death benefit (living benefits) rider on a life insurance policy typically allows the insured to:

Why A is correct

The accelerated death benefit rider permits an insured who is diagnosed with a terminal illness to collect part of the death benefit while still living, so the money can be used for medical care and final expenses. The amount received reduces the death benefit payable to beneficiaries at death. The rider addresses the living needs of the terminally ill and is sometimes called a living needs benefit. The insured must meet the policy's qualifying conditions to receive the advance. Because the benefit is paid early, insurers apply a discount factor when calculating the amount advanced.

Why the other options are wrong

• B) The rider pays a portion of the face amount under qualifying conditions; it is not an interest-free loan of the full face amount. The amount advanced reduces the proceeds that beneficiaries receive at death.
• C) Increasing coverage without evidence of insurability is the function of a guaranteed insurability rider, not this one. No policy loan mechanism provides the full face amount interest-free to a living insured.
• D) A tax-free loan of cash value describes a policy loan or other cash access mechanism, not an accelerated death benefit. Guaranteed insurability lets the owner buy more coverage later without new evidence of insurability.

Memory hook

Terminal diagnosis, advance payday: the death benefit arrives early. Beneficiaries later get what remains.