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Information about all aspects of finances affected by a serious health condition. Includes income sources such as work, investments, and private and government disability programs, and expenses such as medical bills, and how to deal with financial problems.
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Summary

This article describes how to apply for a living benefit (also known as an accelerated death benefit.)To learn about living benefits, including how to find out if your policy has one or whether one can be added, see New Uses of Assets – A Living Benefit From The Life Insurance Company.

Before you apply for a living benefit: If you determine that you may be eligible for a living benefit, consider the following::

  • Call your doctor and let him or her know what you are doing. Is he or she agreeable to providing a "life expectancy" so that you can obtain a living benefit from your life insurance company? (Don't be surprised if you have to explain to the doctor what a "living benefit" is) If the doctor is not willing to write that you have a life expectancy short enough to fit the company's requirements, is there another doctor who is willing to complete the papers for you? Insurance companies usually only require that a doctor complete the paper work and give a life expectancy - not necessarily your specialist.
  • Before contacting the insurance company to inquire about a living benefit, much less applying for one:
    • If your policy is less than two years old, review the application for the insurance to be certain that all of the information you provided in order to obtain the coverage was accurate. During the first two years of any policy, the insurance company that issues the policy has a right to contest the validity of the policy. You want to make sure that they have no reason to do so.
    • During your initial inquiries about a living benefit with the insurance company or your employer, you do not have to disclose your condition or diagnosis. This doesn't mean that you won't be asked about your condition, however. If asked you may politely respond that you don't wish to discuss it. We recommend giving an insurance company as little information as possible until you are able to determine if you may be eligible for the living benefit.
  • Then contact the insurance company and request the papers necessary to apply for a living or accelerated death benefit. You may even find the necessary papers on the company's web site.
  • Before you receive the check, think through what is the best place to park the money until you are ready to use it.
  • NOTE: Be sure to continue to pay premiums on your life insurance policy until the process is complete. Under no circumstances should you ignore any premium that becomes due during the process of applying for a living benefit. It is your responsibility to make sure that the policy remains in force. If you are unable to make premium payments as a result of your financial situation, utilize all of your available resources to keep the policy in force. Don't forget to consider friends or family as possible sources of short term help. You may also consider contacting a local disease specific non-profit organization for assistance. 
  • Note: If you appear eligible for a Living Benefit, then you would likely be eligible for Disability Waiver of Premium if your policy contains such a provision. See: Applying for Disability Waiver of Premium for more information.

How To Apply For A Living Benefit: Individual Policy

If your policy is an individual policy:

  • Complete the application. Make a copy "just in case." Send or take it to the doctor who is willing to provide a "life expectancy".
  • Find out how long it will take the doctor to complete the form, set alerts on your computer or make a note in your calendar. Follow up if you haven't received the form by the noted date.
  • Review the completed form, including the doctor's statements, to be sure everything is completed as desired. When you look at the "life expectancy" keep in mind what we said above about statistics. Also keep in mind that the doctor is trying to help you and is indicating a life expectancy as short as he or she can specifically for the purpose of helping you obtain this benefit.
  • Make a copy of the form for your files.
  • Submit the form with a cover letter that references your policy number and states that you are requesting a Living Benefit under the policy. Mention the amount of money you want to receive as an advance. If you want a check, tell the company to whom it should be payable. If you prefer a wire transfer directly to your bank account, give the insurance company the routing information as well as the name on the account. Ask that your request be attended to as soon as possible. Tell the company to call you if there are any questions. Be sure to provide a phone number at which you can be reached during business hours. Send the letter via certified mail or similar means which will permit you to trace it and to prove that it was received.
  • Follow-up with the insurance company periodically to find out the status of your application. We recommend that you follow up a day or so after you send your information to confirm its receipt -- even if you already know it was received because you track it through the carrier. At this time, ask how long it will take to process. You should then set alerts on your computer or note dates in your calendar to call at least once a week to find out the status of your application.
  • Before you receive payment, think through what is the best place to park the money until you are ready to use it. (To learn more, see Investments.)

How To Apply For A Living Benefit: Group Policy

  • Call the insurance company and ask for an application to obtain the proceeds for a living benefit. Don't be surprised if the insurance company tells you that you have to obtain the application from your employer. If this is the case, ask your employer for the application. If you haven't previously disclosed your condition, read Disclosing Your Condition To Your Employer. Keep in mind that you do not have to tell your employer more about your condition at this point than you want to. You may not be protected against discrimination because of your condition unless you formally make a disclosure for that purpose to your employer -- see Americans With Disabilities Act.
  • If there is a part that has to be completed by your employer, give the form to your employer first to complete that section. Ask that the completed form be returned to you. Find out how long it will take to complete the form and set alerts in your computer or note dates on your calendar to follow up.
  • When you have the form back, check the employer's statements for accuracy. Then complete your section.
  • Make a copy of the form "just in case" and send or take it to the doctor who is willing to provide a "life expectancy".
  • Find out how long it will take the doctor to complete the form, set alerts as above. Follow up on the due date if you haven't received the form by then.
  • Review the completed form, including the doctor's statements, to be sure everything is completed as desired. When you look at the "life expectancy" keep in mind what we said above about statistics. Also keep in mind that the doctor is trying to help you and is indicating a life expectancy as short as he or she can specifically for the purpose of helping you obtain this benefit.
  • Make a copy of the form for your files. You can submit it as is without a cover letter. However, it is preferable to send the form to the insurance company with a letter that references your policy number and states that you are requesting a Living Benefit under the policy. Mention the amount of money you want to receive as an advance. If you want a check, tell the company to whom it should be payable. If you prefer a wire transfer directly to your bank account, give the insurance company the routing information as well as the name on the account. Ask that your request be attended to as soon as possible. Tell the company to call you if there are any questions. Be sure to provide a phone number at which you can be reached during business hours. Send the letter via certified mail or similar means which will permit you to trace it and to prove that it was received.
  • Follow-up with the insurance company periodically to find out the status of your application. We recommend that you follow up a day or so after you send your information to confirm its receipt -- even if you already know it was received because you track it through the carrier. At this time, ask how long it will take to process. You should then set alerts on your computer or note dates in your calendar to call at least once a week to find out the status of your application.
  • Before you receive payment, think through what is the best place to park the money until you are ready to use it. (To learn more, see Investments.)

If You Have Federal Employees Group Life Insurance (FEGLI)

With FEGLI, if you have both basic and additional insurance: you can only accelerate the death benefit of the basic coverage so you receive money now. You can't accelerate any of the additional coverages.

Once a FEGLI policy is accelerated, the remainder cannot be assigned. However, if you convert the entire amount of insurance, then accelerate, you may be able to accelerate a percentage of ALL the insurance -- and probably even be able to sell the remainder.

What About Confidentiality Of My Medical Information?

There are several sources to consider if confidentiality about your medical condition is a concern of yours: Life Insurance Companies, Purchasing Companies, Brokers and your employer if you have the life insurance through work.

Life Insurance Companies: We have been advised by the American Council of Life Insurance and the Medical Information Bureau that medical information provided to obtain a living benefit is not shared. In addition to practice, to do so may very well be against the law of the state in which you reside.

Purchasing Companies and Brokers: If you live in a state with laws specifically regulating Viatical and/or Life Settlements, the laws generally mandate confidentiality for the purchasing companies and brokers. If you live outside a state which imposes such requirements, you're on your own. To rework an old adage, "Seller beware!"

It is difficult to learn with any great degree of assurance the confidentiality practices of a particular purchaser. However, you can ask a company about its practices and have them put whatever they tell you in writing.

Employer: If you are considering selling a group policy obtained from your employer, you should assume the employer will learn of your condition. Although the insurance company issues the policy, your employer may be the only source of information about how the policy applies to you. For example, if the amount of your insurance is a multiple of your salary, your employer must confirm the amount of your salary before the amount of insurance can be verified. It is also possible that the life insurance company will inform your employer.

If you have a group policy through work and you do not want your employer to know your health condition, tell your broker or the purchasing company about your concerns and ask about the likelihood that the employer will be informed of your particular situation.

In general:

  • Feel free to ask each company you consider working with what safeguards it employs to assure confidentiality. Don't be afraid to ask for those safeguards in writing. Also get assurances from the company that it will not contact your employer or beneficiary without your prior consent.
  • Read any authorization forms carefully before signing to ensure that you do not give any company authority to contact anyone you do not want contacted.

When You Receive Payment For A Living Benefit

The letter you receive from the life insurance company should include:

  • The amount of the living benefit.
  • How it was paid.
  • The status of the difference between the amount you receive and the death benefit.

If all of these points are not covered in the insurance company's letter, ask that the missing information be sent to you in writing.

Precautions To Take When You First Contact A Life Insurance Company

Before contacting the insurance company to inquire about a living benefit, much less applying for one:

  • If your policy is less than two years old, review the application for the insurance to be certain that all of the information you provided in order to obtain the coverage was accurate. During the first two years of any policy, the insurance company that issues the policy has a right to contest the validity of the policy. You want to make sure that they have no reason to do so.
  • During your initial inquiries about a living benefit with the insurance company or your employer, you do not have to disclose your condition or diagnosis. This doesn't mean that you won't be asked about your condition, however. If asked you may politely respond that you don't wish to discuss it. We recommend giving an insurance company as little information as possible until you are able to determine if you may be eligible for the living benefit.