Additional Death Benefit

Additional Death Benefit

In some life insurance policies, an extra benefit the beneficiaries of the policy receive upon the death of the policyholder, provided one's death occurs under certain, defined circumstances. For example, a policy may pay an additional death benefit if the policyholder dies before his/her retirement. The amount of the additional death benefit and the circumstances under which it is paid are defined in the policy.
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Essentially, a paid-up addition is an additional death benefit (also with cash value) that is purchased in conjunction with a whole life policy (either with dividends or through additional premium payments).
However, due to the martingale property of the fund process and the fee deducted from the account value, the expected value of the additional death benefit is never greater than the withdrawal amount.
Benefits include: A $500,00 accidental death benefit; up to $250,000 in excess medical coverage; up to $50,000 benefit for mental health counseling; disability income coverage; plus an additional death benefit for the donor's travel companion.
Available term riders provide an additional death benefit during the first four policy years, while a policy split option rider can be used in the event of divorce or tax law changes.
Also found in many last survivor policies is an estate protection rider that pays an additional death benefit if both insureds die within four years of purchasing the policy.
This rider pays an additional death benefit if the insured dies as a result of an accident before age 70--in effect, doubling the amount of coverage.
If the client dies 10 years after initiating the policy, the policy face amount will have grown to $11.5 million, leaving a net of $10 million after using the $1.5 million additional death benefit to retire the policy loan.
The beneficiary receives an additional death benefit equal to 40% of the earnings accumulated up to age 69.
This rider pays an additional death benefit if the insured dies as a result of an accident before age 70 -- in effect, doubling the amount of coverage.
Michele Van Leer, vice president and general manager of individual insurance at SunLife Financial, Wellesley, Mass., says the company now offers on its policies a charitable giving benefit rider that will pay a 1% additional death benefit to a named charity.
While DBO plans are not the most cost-effective death benefit for the executive, they can provide an additional death benefit at no current cost to the employee.
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