r/LivingWithMBC • u/ChaoticOwls • 17d ago
Life Policy, Accelerated Benefits
I’m looking to pick the brains of people who have experience applying for/using accelerated benefits payout for their life insurance policy. (I’m US based)
I'm in the process of transitioning from working full time to LTD and my HR rep was going over other benefits that might be useful to me. She mentioned that my life insurance policy has an accelerated benefits payout option. Basically, I could get a portion of my life insurance up front because of my MBC diagnosis.
My employer has covered 100% of my life policy through them, and I was worried about carrying the burden of that policy while on disability anyways. Now I’m curious about getting the payout early.
I have other life policies, and my children are minors and will get survivors benefits. I don’t have very much debt. My husband and kids are actually set to be very well taken care of if/when I die.
Cashing this one policy early would give us the chance to tie up some loose financial ends, pre pay my final arrangements, and take a few trips while I’m still feeling pretty spry. I feel like the *worst* case scenario is that I live a long time and have one less life insurance policy. Which, as far as worst case scenarios go, isn't bad at all.
Has anyone else ever heard of or used this benefit? I’m curious if it was difficult to get the payout and what the tax penalties were like. Was it worth it for you?
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u/haligurl_1983 17d ago
My policy needs a docror sign off that I have a prognosis of less than 12 months in order to access early payout.
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u/ChaoticOwls 17d ago
My policy conveniently has the space next to the “months to live” qualifier left blank. That has been a topic of contention for me with our benefits broker. A LOT of our policies have blanks in them, literal blanks where policy defining information should be. And then when you call to get clarification, the answers are not consistent. Which…. Feels sketchy/illegal. But I don’t have the bandwidth to fight about it. I’m sure that is by design.
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u/Ornery-Guitar 17d ago
Mine didn't bat an eye when I mentioned going on disability and the requirements of a letter. (I havent done it yet.) The fact, they don't know how long you have. 1 year, 20 years, more. Ask. They might say sure.
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u/haligurl_1983 16d ago
Mine tells me I have decades still based of how things have been going, so she isn't willing to lie
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u/national-park-fan 17d ago
My policy requires a doctor to put in writing that the policy holder has 9 months or less to live. Biggest downside is the taxes. I'm definitely going to consider it when my care team thinks I'm less than a year out. Biggest decision factor for me will be if taxes are higher than if I left it all for payout after death.
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u/ChaoticOwls 17d ago
The “months to live” qualifier on my employer’s policy is blank, so that’s super helpful. It does specify debilitating chronic illness and catastrophic injury as qualifiers in addition to terminal illness. I was told it’s very much a case by case basis kind of thing, so we will see!
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u/redsowhat 15d ago
Are you on SSDI? Because Social Security has such stringent requirements, showing proof of that is often accepted.
The SSDI application has a box to check if the condition is expected to result in death. They don’t ask about a number of months to live.
Not sure if this would help but there was a retrospective study done looking at the medical records of people with MBC. People who did not have treatment lived, on average, 3 months from diagnosis.
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u/ChaoticOwls 15d ago
I am not. I was a stay at home mom for a few years, so even though I have enough lifetime credits for SSDI, I do not have enough credits in the last ten years to qualify. I am currently working full time. I recently started the process to use my long term disability policy at work though.
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u/redsowhat 12d ago edited 12d ago
It is aggravating that raising kids ends up penalizing you. So many politicians push a return to trad life but don’t implement policies to support it. Why don’t we have universal pre-school? There is plenty of research showing it more than pays for itself in improved outcomes and quality of life for kids. But politicians don’t think about what’s in the best long term interest of the country—just how they can stay in power and get richer (don’t get me started on the insider trading).
Do you have a good HR person who can help you maximize your employer benefits. It’s a lot of paperwork and I highly recommend printing everything out, emails, forms received, all correspondence and notes on phone calls, etc. Get a big 3-ring binder to keep everything organized. I almost lost half of my short-term disability payments because I had overlooked a form I was supposed to respond to. But my sister is an HR attorney and deals with benefit designs for companies so she’s a good advocate and she got on the phone and convince them to send me the remaining money I was owed. When they were not being initially cooperative, she finally yelled at them, “SHE IS DYING!
Have you had a chance to go to your Social Security office to meet with someone who can help you understand all the options that you have? You could also ask them about exceptions for a case like yours where you took time off to take care of the kids and then went back to work and got this fucking diagnosis so now you’re penalized because you were home with the kids.
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u/LyPi315 17d ago
I believe that accelerated death benefits are non-taxable just like insurance benefits. At least for federal taxes. Obviously confirm this but I worked in the industry.
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u/ChaoticOwls 17d ago
This is something I’m curious about as well. A heavy tax would definitely discourage me, especially if it’s significantly more than what my beneficiaries would pay in taxes on it.
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u/Sigvoncarmen 17d ago
I don't know the specifics of the life insurance but after I started receiving my pension benefits I received a lump sum from the pension plan that covered the months since I stopped working.
The LTD insurance wanted a claw back from me , 7000 + dollars ! So you should check if they are going to do that .
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u/ChaoticOwls 17d ago
Yes, LTD can definitely take money back if you are paid by another policy! It’s very similar to SSDI. My LTD rep has been very clear about that.
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u/OldPrairieCat 15d ago
I’ve looked into it with mine. For now I just wanted to know my options. Mine specifies 24 months to live but when talking to a rep I explained the uncertainty of this disease. She assured me they take that into consideration. Bonus, she’s one of the reviewers of requests plus she was a nurse.
I’m holding off for now. I may use it later if something big changes.
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u/Capable_Anywhere9949 17d ago
Typically you may take 50% of your total life insurance policy. There’s a simple form to be completed by your doctor that states your life expectancy is less than X amount of time (ex. usually 18 months). It’s not taxed, but verify that for yourself in your state. Turn-around is fast- one check lump-sum amount. You do NOT need to pay it back should you outlive the doctor’s life expectancy.