Life insurance companies try to prepare you for every possible situation, but what happens if you receive a diagnosis for a terminal illness?

Some life insurance companies will offer a terminal illness benefit. This feature can help you meet some of the costs associated with long-term medical care.

What is a Terminal Illness Benefit?

A terminal illness benefit allows the policy holder to receive a death benefit before their actual passing.

Generally, claimants will have to meet certain requirements. Most life insurance providers ask for a diagnosis which predicts a life expectancy of twelve months or less. The life insurance coverage will also have to be in effect for at least two years.

However, these requirements can vary between different states. Remember to check with your insurance provider to see if you can meet these conditions.

Why Would I Need a Terminal Illness Benefit?

When a loved one suffers from a terminal illness, costs can add up quickly. Often, the money they’ve set aside for their life insurance policy would relieve their caregivers of the financial burdens that come with end-of-life care.

Some life insurance policies, however, can’t adjust their coverage to provide death benefits prematurely. That’s why life insurance providers can offer a terminal illness benefit, which allows the beneficiaries to receive the death benefit payment earlier.

Many life insurance companies will offer a terminal illness benefit free of charge. With other policies, you may be able to purchase this benefit as an additional rider to your policy.

Is a Terminal Illness Benefit Different from a Critical Illness Benefit?

Yes. Insurance companies define a “critical illness” as a disease which, though serious, may not end your life. A “terminal illness” is one expected to end your life within twelve months or less. A life insurance provider will usually include a critical illness benefit along with a terminal illness benefit as a part of the same policy.

Your life insurance provider will have a list of diseases it considers critical illnesses. Before you can claim a terminal illness benefit, make sure to review this list and see if it covers your illness.

How Will I Receive the Payments for a Terminal Illness Benefit?

Similar to a death benefit, terminal illness benefits are usually paid in a lump sum.

It’s common for the terminal illness benefit to be smaller than the actual death benefit. Insurance companies will often use money from the death benefit to pay off any unpaid premiums or charges. They will also adjust the amount you receive based off your age, sex, and prior interest rates.