If you are buying term life insurance whether online or offline you will find quotes saying buy term life insurance from us and you will get FREE TERMINAL ILLNESS RIDER.
But what exactly is a terminal illness in term insurance? Many a times people often get confused with critical illness and terminal illness but these are two different things. We will also look into What are the benefits of terminal illness in term insurance? How Does Terminal Illness Insurance Work, The list of terminal illness diseases, What is Early Payout on Terminal Illness, and Who cannot get terminal illness early payout?
Terminal Illness in Term Insurance Plan?
Terminal illness in a term insurance plan refers to any kind of disease or illness from which there is merely or very less survival chances for the patient or the term insurance plan holder. Terminal illness provision in the term insurance allows the term insurance plan holder to receive some portion of their death benefits in advance.
This advance payout is not the complete amount of the death payout but a percentage of the total death payout amount and usually this ranges differ from the term insurance company wise but usually ranges about 25% – 80% of the death benefit.
Usually, terminal illness coverage is given to the policy holders in the case when they have a life expectancy of less than a year or six months.
This advance payout can be used for various purposes like covering hospital expenses, medicine bills, etc of the individuals. In many cases, this advance payout in terminal illness is tax free which means no tax amount is deducted from the sum of money.
How Does Terminal Illness Insurance Works
Terminal Illness Insurance also known as accelerated death benefit provides the policy holder individual with a portion of their term insurance benefit before their death to help them in their financial needs. To understand how does Terminal Illness Insurance Works let us understand it with an example:
Say if Mr. Narendra Kumar buys a term insurance plan worth Rs. 1,00,00,000 with an additional add on terminal illness cover. After 6 years Mr. Kumar gets diagnosed with a heart disease which is incurable and is declared as terminally ill by the doctors with an expected life of about 6 months. In this case, the insurer will pay Mr. Kumar the full amount of Rs. 1,00,00,000 in advance and the policy gets terminated.
Now Mr. Kumar can use this money for his medical assistance like paying hospital bills, medical bills and getting him some expert treatments without no worries of finances.
Benefits of Terminal Illness in Term Insurance?
The benefits that are associated with terminal illness in a Term insurance plan for the term insurance rider are the following:
Key Take– With the Terminal Illness Benefit the individual can receive their life insurance lump sum money only in the case if the policy holder individual dies within the expected time period of 12 months or one year.
- Financial Stability:
The terminal illness provides some percentage of the death payout amount that can benefit to both the term insurance policy holder and their family with financial support which they need during the tough time that is needed for hospital bills, medicine bills, lifestyle, or living expenses of the policy holder.
- Emotional Ease:
The terminal illness provides Emotional support to the term insurance policy holder by letting them relieve the stress and anxiety that were associated with the financial implications of a terminal diagnosis.
This helps them to keep their mind in peace and focus more on their health, well being, spending quality time with their loved ones, and making any important decisions in their final time rather than focusing on any financial burden in their head.
- Longer Safety:
Most of the terminal illness in term life insurance plans cover terminal illness for a long time. Most of the term insurance companies’ plans range from the protection against terminal illness to the age of 85 years of the policy holder.
- Tax Free Proceedings:
To maximize the use of the terminal illness funds often the terminal illness payouts are free from any kind of tax to ensure that individuals uses the full amount of sum of money in handling their financial expenses like hospital bills, medicine bills, well beings, etc.
List of Terminal Illness in Term Insurance
As told earlier the terminal illness diseases refers to a kind of disease from which the survival chances of the individual are very low and typically has a life expectancy as per doctors less than 1 year to six months.
There are numerous diseases that are terminal but some of the most common terminal illness diseases include the following:
- Cancer (various types such as lung cancer, breast cancer, etc.)
- Heart attack (in severe cases)
- Stroke (in severe cases)
- End-stage renal failure (kidney failure)
- End-stage liver disease (liver failure)
- Advanced stage of HIV/AIDS
- Terminal stage of motor neuron disease
- Advanced stage of Parkinson’s disease
- Terminal stage of Alzheimer’s disease
- Advanced stage of amyotrophic lateral sclerosis (ALS)
What is Early Payout on Terminal Illness
Early Payout is an important and also very useful feature of a term insurance plan. Early Payout on Terminal Illness in term insurance is an early demise or an early death payout also known as an accelerated death benefit (ADB).
Its a feature that is offered by some term insurance policies in India. Early Payout simply means that if the policy holder is expected to die within the tenure or the time period of the policy that is usually around 12 months.
The insurer will pay the lump sum amount that they would have paid if the policyholder dies within the time period of the policy along with some additional bonus amount after the policy holder’s death.
What Disqualifies From Early Payout on Terminal Illness?
In some policy companies, there is a policy that if the insurance company receives the diagnostic report of the policy holder who is diagnosed with a terminal illness in the last year or year and a half (12 to 18 months) of getting a term insurance policy then, in that case, the policy holder gets disqualifies from the early payout on terminal illness.
The Early Payout is helpful in the case if the individual or the policy holder is still alive and there is a need of money to cover the financial expenses on the hospital bills, medical bills, treatment, etc.