Tennessee Life Producer Practice Exam

What do accelerated death benefits provide for?

1. Revocable loans against the policy

2. Early payment of a portion of the policy face amount

3. Increased death benefits for dependents

4. Tax exemptions on benefits received

The correct answer is: Early payment of a portion of the policy face amount

Accelerated death benefits are designed to allow policyholders to receive a portion of their life insurance policy's death benefit while they are still alive, typically due to a terminal illness or certain conditions that significantly affect their quality of life. This early payment can help cover medical expenses, long-term care, or other financial needs that arise as a result of the policyholder's condition. The amount received through accelerated death benefits is taken out of the total face amount of the policy, effectively reducing the death benefit that will be paid out to beneficiaries upon the policyholder's passing. This design serves a critical purpose, offering financial relief to individuals facing severe health challenges and providing them with options to manage their care and financial obligations during difficult times.