Early pay-out on terminal illness is a unique and useful feature of a term insurance plan. The purpose of a term life cover is to safeguard your family’s financial status, and terminal illnesses can disrupt that even before your demise.
Thus, the best term insurance plans often include the benefit of early pay-out on the diagnosis of a terminal illness.
What is Terminal Illness Benefit in a Term Insurance Policy?
Terminal illnesses refer to health conditions which are either incurable or in a stage where a life-saving cure may not be possible. For example, heart failure, respiratory failure, failure of both kidneys, final-stage cancers, etc.
Many terminal illnesses can be cured if detected in the early stages, but they can also progress rapidly and unpredictably. Often in the final stages, the life-saving treatment is not only expensive but may also alter your life significantly.
Therefore, big financial assistance, such as from your term plan, is useful for you and your family. The terminal illness benefit received from the term insurance is usually the death benefit sum assured.
So, you can receive a large sum of money or a regular income as selected at the time of purchase.
How does Early Pay Out in Terminal Illness Work?
First of all, you should have a term insurance policy which offers terminal illness coverage. You will be eligible for terminal illness benefit if you are diagnosed with the final stages of any of the following illnesses:
- Heart failure
- Renal failure
- Brain tumour
- Alzheimer’s disease
- Cancer, etc.
The terminal illness pay-out works based on the diagnosis of the illness. Early payment on terminal illness means the payment of death benefit before the death of the policyholder. The term insurance policy will expire after paying the terminal illness benefit. This is the same as the payment of death benefit.
Once you have a confirmed diagnosis of a covered terminal illness condition, you can file your claim with the insurer. The insurer will approve or reject the claim based on:
- Your medical condition and progress of the disease
- Remaining policy term
- Pre-existing or excluded conditions
Even if your terminal illness claim is rejected by the insurer, your term policy will continue. This means that the policy will cover your family from your death even after the terminal illness claim is rejected.
Why is Early Pay Out on Terminal Illness Important?
Terminal illnesses affect your family emotionally and financially both. While you can manage emotional stress, financial stress is often two-fold if you are the sole breadwinner. First, you need to spend money on alternate diagnoses, treatments, medicine, etc. And then you also need to have a replacement income.
Terminal illnesses can affect your professional and employment progress badly. Thus, hurting your income. This is why early payment for terminal illnesses is very important.
The amount can enable you to avail of treatments, and provide for your family’s regular expenses. With the benefit amount, you can ensure a regular income to look after your household expenses and use the lump sum for medical purposes.
Thus, early pay out on terminal illness plays an important role in:
- Replacing your lost employment income due to the illness
- Provides you with resources to seek better treatment or settle financial issues
- The money is tax-free in your and your family’s hands
Does Terminal Illness Benefit Apply to Pre-existing Illnesses?
Pre-existing illnesses will be those illnesses which have had a successful diagnosis within 24 months of your policy purchase. Usually, when you buy a new term insurance policy with terminal illness benefits, pre-existing illnesses are excluded from the coverage.
Learn if you can buy a critical illness cover if you have pre-existing health conditions.
In this case, the following will apply to your term insurance cover proposal with terminal illness benefits:
- The proposal will be rejected if the insurer finds that your death may occur within 12-24 months
- The policy will cover only death due to the pre-existing illness condition
- The premium will be higher than normal for your life cover
Terminal Illness vs Critical Illness
It is common to confuse critical illness benefits with terminal illness benefits. However, there are a few major differences:
|Terminal Illness Cover||Critical Illness Cover|
|Availability||Available as an inbuilt cover with term insurance||Can be availed as a separate cover or a rider to health or term insurance plans|
|Sum Assured||Death benefit sum assured is available as a terminal illness benefit||You can select a separate sum assured for CI benefits|
|Claim Payments||Upon successful application, the death benefit is paid and the policy terminates, even if the policyholder is alive||
Depending on the benefits opted you can receive the:
- A lump sum amount
|Covered Conditions||Typically the final stages of any life-threatening disease||Covers multiple stages of different diseases|
Terminal Illness Benefit in iSelect Smart360 Term Plan
Term insurance plan from Canara HSBC Life Insurance, iSelect Smart360 Term Plan provides early pay-out on terminal illness. If your diagnosis falls under the covered medical condition umbrella the entire death benefit becomes payable.
That means the lump sum and regular income both will start for your family after your claim. The policy will terminate after paying this claim. However, the better way is to add a critical illness rider to your term insurance plan.
This rider can allow financial benefits to you during the treatment stages of the disease. Thus, you can avail of better treatment and recovery.Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised to exercise their caution and not to rely on the contents of the article as conclusive in nature. Readers should research further or consult an expert in this regard.