PSI Life Exam Practice Test

What is an accelerated death benefit?

1. An additional yearly bonus payment

2. A portion of the face amount paid when terminally ill

3. A premium reduction option

4. An investment option during the policy term

The correct answer is: A portion of the face amount paid when terminally ill

An accelerated death benefit refers to a feature in a life insurance policy that allows the policyholder to access a portion of the death benefit while they are still alive, specifically when they are terminally ill. This option provides financial support during a challenging time, enabling the insured to cover medical expenses, pay for care, or fulfill any other financial needs they may have in their final days. This benefit is particularly valuable because it alleviates some of the financial burden that often accompanies terminal illness. The amount received as an accelerated death benefit is deducted from the total death benefit that the beneficiaries will receive upon the policyholder's passing, but it allows for immediate access to funds when they are most needed. The other options do not accurately capture the essence of what an accelerated death benefit entails, as they refer to different aspects of life insurance or are not relevant to the immediate financial support provided under the context of terminal illness.