What is the purpose of accelerated death benefits?

Accelerated death benefits are designed to provide policyholders with access to a portion of their death benefit while they are still alive, typically in the event of a chronic or terminal illness. This provision allows individuals facing significant health challenges to use funds that would ultimately go to their beneficiaries for expenses related to their medical care, living expenses, or other necessary costs.

The policyholder may receive this early payment under specific circumstances defined in the insurance policy, making it a helpful financial resource when facing critical health issues. It ensures that individuals can manage their financial needs without waiting until their death to unlock the benefits of the policy.

In contrast, the other options do not align with the purpose of accelerated death benefits. Increasing the policy's cash value pertains to how whole life policies accumulate value over time rather than providing immediate access to funds. Converting term life insurance to whole life addresses a different aspect of insurance policy options without involving early access to benefits. Lastly, paying dividends to policyholders relates to participating policies where policyholders might receive a share of the insurer’s profits but does not connect to accessing death benefits early.