Massachusetts Life Producer Practice Exam

What happens to the death benefit of a life insurance policy if the insured takes a partial payment from the accelerated (living) benefits provision?

1. The death benefit remains unchanged.

2. The death benefit is reduced.

3. The death benefit is temporarily suspended.

4. The death benefit is forfeited entirely.

The correct answer is: The death benefit is reduced.

When a life insurance policy includes an accelerated (or living) benefits provision, it allows the insured to receive a portion of their death benefit while still alive, often in cases of terminal illness or other qualifying conditions. If the insured chooses to take a partial payment from this provision, the total death benefit will be reduced by the amount that has been received. This is designed to support the insured during a time of need, providing financial resources for medical expenses or other costs without entirely forfeiting the policy. The key point here is that the payment taken is considered an advance against the total death benefit, meaning that when the insured passes away, the beneficiaries will receive the original death benefit amount minus any amounts already paid out through the accelerated benefits. This mechanism ensures that the living benefits provision can assist the policyholder while still retaining some level of coverage for their beneficiaries upon death.