Proceeds from a life insurance contract for a life-threatening condition are known as what?

• A. Living benefits
• B. Accelerated benefits
• C. Viatical proceeds
• D. Cash surrender value

Answer: (B)

When a life insurance policy lets the insured access funds early because of a terminal or life-threatening condition, those funds are called accelerated benefits. They are drawn from the policy’s death benefit and paid out while the insured is still alive, which is why they’re sometimes referred to as living benefits, but the standard term for this scenario is accelerated benefits. These proceeds help with medical expenses or income during the illness and reduce the death benefit remaining for beneficiaries. They are not viatical proceeds, which come from selling the policy to a third party, and not the cash surrender value, which is what you’d receive if you cancel the policy.