New Jersey Life and Health State Practice Exam

An accelerated death benefit rider is indeed considered an alternative to a life settlement. This rider allows policyholders to access a portion of their life insurance death benefit while still alive, under specific circumstances such as terminal illness or severe medical conditions. This option can provide immediate funds to the insured during a critical time, which may be more desirable than selling the policy through a life settlement.

While a life settlement involves selling an existing life insurance policy for a lump sum, the accelerated death benefit rider serves as an alternative by enabling the policyholder to directly access funds they need without relinquishing the policy ownership. This can be advantageous for those who want to maintain their coverage or for beneficiaries while still receiving monetary assistance during a difficult period.

In contrast, term life, whole life, and universal life policies do not directly offer the same immediate financial relief to the insured; rather, they represent different types of life insurance products that provide financial coverage upon the insured's death but typically do not have provisions allowing for early access to benefits in the manner that an accelerated death benefit rider does.