What Is Accelerative Endowment?

An accelerative endowment is an option in a whole life insurance policy that allows the policyholder to access the accumulated dividends in the account as a lump-sum payment rather than leaving them to be inherited by his or her beneficiaries.

In effect, the policyholder is using the accumulated dividends to convert the policy into an endowment policy prior to its normal maturity date.

Understanding Accelerative Endowment

An endowment policy can provide for a lump sum payment to the insured after a certain period, as specified in the contract.

The accelerative endowment gives the policyholders the option to receive a lump sum of money.

Other whole life insurance options are designed to provide financial security to the beneficiaries of the policyholder. These benefits are paid only upon the death of the insured.

The Lump Sum Option

The lump-sum option allows the insured to make alternative investments or arrange for a fixed income through the purchase of an annuity policy. In fact, the lump sum received can be invested any way a policyholder wants.

An accelerative endowment allows dividend accumulations to be applied to convert a whole life insurance policy into an endowment or to shorten the endowment term. 

An endowment life insurance policy will grow in value over a time period selected by the policyholder, such as 18 years, and will pay out a lump sum on a specified date at the end of that time period. That is the maturity date.

An accelerative endowment moves that payment date up to immediately.

The primary purpose of an endowment policy is to build cash value. In addition, an endowment policy provides life insurance protection for the term of the policy. If the policyholder dies before the policy matures, a benefit is paid for the full coverage amount.

The amount paid at maturity or as a death benefit is the same amount.

In general, people buy whole life insurance to protect their families financially. With accelerative endowments, benefits are paid as a living benefit. 

If the insured lives longer than the period covere

In some cases, the beneficiary can borrow money against the money which has been invested. This is a contract option.

In addition, the part of installments which is invested may generate earnings, which may be tax-deferred if the insurance policy is cashed in during the life of the insured.