Life Insurance And Terminal Illness: What's The Payout?

Life insurance policies often include a terminal illness benefit, which allows the policyholder to claim the full benefit amount if they are diagnosed with a terminal illness. This benefit is typically included as an added feature on most life insurance policies, rather than a standalone product. The purpose of this benefit is to provide financial assistance to the policyholder during their remaining months and to make it easier for them to plan for their family and loved ones. The payout amount can be used at the policyholder's discretion, whether to cover medical expenses, settle debts, or fulfil personal wishes.

Terminal illness defined

Terminal illness cover is usually an additional benefit on most life insurance policies, rather than a standalone product. It pays out the full cover amount if you are diagnosed with a terminal illness, with a life expectancy of fewer than 12 months, during your period of cover.

A terminal illness is defined as an incurable illness that, in the opinion of a medical doctor or consultant, will lead to death within 12 months. It is a disease that has no known cure or has progressed to a point where it cannot be cured.

Terminal illness benefit payouts are intended to make it easier for the policyholder to make plans for their family and loved ones, as well as provide funds for their remaining months of life. The payout can be used to cover medical bills, settle debts, or fulfil personal wishes, such as taking a trip.

It is important to note that terminal illness cover is different from critical illness cover or dread disease cover. Critical illness cover supports a policyholder diagnosed with a serious illness that affects their quality of life but will not directly result in death. On the other hand, dread disease cover is often an optional add-on to a life insurance policy and provides financial support if the policyholder is diagnosed with an illness that leaves them unable to provide for their loved ones.

Terminal illness benefit claims

To make a successful terminal illness benefit claim, the insured person must provide proof of their diagnosis and meet the criteria set by their insurance company. This typically involves obtaining a medical report from a treating specialist or consultant, confirming that the illness is incurable and likely to lead to death within 12 months. The insurer's medical officer will assess the claim and, if approved, the policyholder can receive an early payout of their life insurance benefit.

The payout amount from a terminal illness benefit claim can range from R200 000 to R10 million, depending on the cover amount. This money can be used to cover medical bills, settle debts, or fulfil personal wishes during the insured person's remaining months. It is important to note that the terminal illness benefit is usually paid out only once and that the policy will make no further payouts after the policyholder's death.

When making a claim, it is essential to review the specific requirements and criteria of your insurance provider. Some companies may have additional requirements, such as identity verification, consent forms, and proof of banking details. It is also worth noting that some claims may be rejected if made in the final months of a policy's term. Therefore, it is crucial to carefully review the terms and conditions of your life insurance policy to understand the coverage and limitations of terminal illness benefits.

By understanding the process and requirements of terminal illness benefit claims, individuals can ensure they are prepared and able to access the financial support they need during challenging times.

Terminal illness cover vs. dread disease cover

Terminal illness cover and dread disease cover are two different types of insurance policies that offer financial protection in the event of a serious illness. While both types of cover can provide valuable financial support, there are some key differences between them.

Terminal illness cover is typically included as an added benefit on most life insurance policies, rather than being available as a standalone product. It provides a payout if the policyholder is diagnosed with a terminal illness, likely to lead to death within 12 months of diagnosis. The payout amount depends on the cover amount, which can range from R200,000 to R10 million. Terminal illness cover gives policyholders the right to claim the full benefit amount of the death benefit and/or critical illness benefit if they become terminally ill. This means that instead of waiting until death, the policyholder can make use of the life policy payout during their final months.

On the other hand, dread disease cover is an optional add-on benefit to a life insurance policy or a standalone policy. It provides financial protection if the policyholder is diagnosed with a severe or debilitating illness, whether terminal or not. Dread disease cover typically takes the form of a tax-free lump-sum payment on the diagnosis of a listed illness, which must be made by a registered medical professional. The payout amount can be used to cover medical expenses, home modifications, lifestyle adaptations, debt settlement, or loss of income. Most dread disease cover policies cover cancer, stroke, heart attacks, and coronary bypass graft surgery, which are considered the "Big 4" when it comes to dread diseases.

One key difference between terminal illness cover and dread disease cover is the stage of illness they cover. Terminal illness cover specifically applies to illnesses that will lead to death within 12 months, while dread disease cover applies to all stages of an illness, including death. Additionally, dread disease cover typically offers payouts in increments depending on the severity of the illness, while terminal illness cover provides a full payout upon a terminal diagnosis.

Another difference lies in the cost and availability of the cover. Dread disease cover is generally more expensive than terminal illness cover because it covers more common illnesses such as heart attacks and strokes. As a result, it is often offered as a separate add-on policy. In contrast, terminal illness cover is usually included automatically in life insurance policies at no additional charge.

In conclusion, while both terminal illness cover and dread disease cover provide financial protection in the event of a serious illness, they differ in terms of their inclusion in life insurance policies, the stage of illness they cover, payout structures, and cost. When considering which type of cover to choose, individuals should carefully review their insurance policies, assess their personal health and financial needs, and seek advice from a financial advisor.

Terminal illness benefit vs. critical illness cover

The terms "critical illness" and "terminal illness" sound similar and both refer to serious medical conditions, but there are key differences between the two when it comes to life insurance.

Terminal Illness Benefit

Terminal illness benefit is usually included within a life insurance policy at no additional charge. It allows the policyholder to make an early death claim if they are diagnosed with a terminal illness. A terminal illness is defined as a disease or condition that cannot be cured and is likely to lead to death. The insurance company's medical officer will need to see medical evidence confirming the diagnosis and that the insured person is unlikely to live for more than 12 months. The payout can be used for any purpose chosen by the policyholder.

Critical Illness Cover

Critical illness insurance, on the other hand, is an insurance policy that is paid for monthly and can be bought on its own or alongside a life insurance policy. It pays out a lump sum to the policyholder if they are diagnosed with a critical illness, which is typically defined as a serious illness or significant injury that the person is likely to be living with. Critical illnesses are often curable but can be deadly if not treated properly. Common critical illnesses include cancer, heart attacks, and strokes. Premiums for critical illness insurance are generally three to four times more expensive than life insurance.

Key Differences

The main difference between terminal illness benefit and critical illness cover is that terminal illness benefit is usually included in a life insurance policy, while critical illness cover is typically purchased separately. Additionally, terminal illness benefit pays out if the insured person is diagnosed with a terminal illness and has a life expectancy of less than 12 months, whereas critical illness cover pays out for certain serious conditions that the person will be living with. Critical illness cover is more expensive because it covers more common illnesses, while terminal illness benefit only pays out for terminal illnesses that directly result in death.

Getting life insurance after a terminal illness diagnosis

If you've been diagnosed with a terminal illness, it's important to know what your options are when it comes to life insurance. Here's a guide to help you navigate this challenging situation:

Understanding terminal illness cover

Terminal illness cover is typically an additional benefit included in most life insurance policies rather than a standalone product. This benefit provides a payout if you are diagnosed with a terminal illness and are expected to live for less than 12 months. A terminal illness is defined as an incurable illness that has progressed to a point where it cannot be cured and will lead to death within a short period.

Checking your existing policy

If you already have life insurance and are diagnosed with a terminal illness, review your policy carefully. Some policies include terminal illness cover, which allows you to make a claim and receive a payout immediately. This payout can help you cover medical expenses, settle debts, or fulfil any wishes during your remaining months. Remember to check with your insurer to confirm if terminal illness cover is included in your specific policy.

Applying for a new policy

Obtaining a new life insurance policy after a terminal illness diagnosis can be challenging. Insurance companies consider various factors, such as the type and stage of the illness. They may request medical records and details from your doctor or hospital. Additionally, the initial premiums are typically higher due to the increased risk associated with the diagnosis. It is essential to have honest and open discussions with your insurer to understand your options and any special considerations.

Seeking expert advice

Engaging the services of an independent financial advisor or insurance broker is highly recommended. They can guide you in finding the most suitable insurance policy for your circumstances. A good financial advisor will compare rates from different companies and recommend the best deals tailored to your needs. Their expertise can be invaluable in navigating the complex world of insurance, especially during this difficult time.

Understanding different types of life insurance

It is worth noting that there are different types of life insurance policies available, each with its own unique features. These include term life insurance, which can be level, decreasing, or increasing, and whole-of-life insurance, which covers you for your entire life. Additionally, there is family income benefit insurance, which provides regular income to your loved ones after your passing. Understanding these options can help you make an informed decision about the type of policy that best suits your needs and those of your family.

Frequently asked questions