Final answer:
The provision that allows policyholders to receive a portion of the death benefit before death if diagnosed with a terminal illness is known as an accelerated death benefit rider or living benefit rider.
Step-by-step explanation:
The provision that pays a portion of the death benefit prior to the insured's death due to a terminal condition is called an accelerated death benefit rider or a living benefit rider. It is typically included in life insurance policies and allows the policyholder to receive cash advances against the death benefit if they are diagnosed with a terminal illness. These funds can be used to cover medical expenses, debts, or any other needs the policyholder may have, providing financial relief when it's most needed.
The accelerated death benefit is calculated based on several factors, including the policy's face value and the severity of the policyholder's illness. Insurance companies may also have various criteria for qualifying for this benefit, such as the expected lifespan of the insured after the diagnosis. This rider is a valuable feature of a life insurance policy as it provides the policyholder and their family with options and support during a difficult time.