South Carolina Insurance Practice Exam

Which of the following is NOT a characteristic of the Accelerated Death Benefit option?

1. Offered at no extra cost

2. Available as a rider

3. Provides immediate cash value

4. Can be offered at a specific exit cost

The correct answer is: Provides immediate cash value

The Accelerated Death Benefit (ADB) option is designed to provide policyholders with access to a portion of their life insurance benefits while they are still alive under certain qualifying conditions, typically due to terminal illness or chronic conditions. The key characteristic of the ADB option is that it allows for an advance payment to the insured, but this advance does not create immediate cash value. When considering the characteristics, it's important to note that the other options correctly reflect aspects of the ADB. It is often offered at no extra cost, prioritizing accessibility for policyholders who may need these funds quickly, and can be structured as a rider that attaches to a base life insurance policy. The ADB does not, however, provide immediate cash value like a typical cash value policy might do. Instead, it allows for an early payout that reduces the death benefit payable upon the insured's passing. The idea of "offered at a specific exit cost" does not align with how ADB benefits are commonly structured, as any funds received are deducted from the total death benefit rather than being tied to specific fees or costs that must be paid upfront. Thus, recognizing that ADB focuses on an advance against the death benefit, rather than creating a cash value, clarifies why this