Life Insurance Options For Terminally Ill Patients

A terminal illness can prompt thoughts about life insurance and how to continue taking care of your family. While it is possible to secure life insurance if you are terminally ill, your options will be limited and your premiums will be more expensive. The only type of life insurance you can buy if you have been diagnosed with a terminal illness is a guaranteed issue life insurance policy, also known as final expense or burial insurance. This type of policy offers modest coverage, usually up to $25,000, in return for high premium payments. It is important to note that guaranteed issue policies are typically only available to those over 40 years of age.

Guaranteed issue life insurance

These policies are usually available to those aged between 50 and 80, although this depends on the insurance company. They are typically more expensive than other types of policies because they are considered riskier. There is also a waiting period of around two to three years before the benefits go into effect. If the policyholder passes away before the waiting period is over, the beneficiary will not receive the death benefit. Instead, they will receive the paid premiums back with interest.

The death benefit for guaranteed issue life insurance is limited, with a maximum of $25,000. However, the policyholder can scale the benefit, usually between $2,000 and $25,000. The policy is permanent, with no set end date, and there are no age limits.

Funeral expense life insurance

If you or a loved one is terminally ill, you may be wondering how you can continue to take care of your family and cover end-of-life expenses. While it is difficult to obtain a new life insurance policy after a terminal diagnosis, there are options available to help ease the financial burden on your family. One option is funeral expense life insurance, which can help cover funeral, burial, or cremation expenses.

Types of Funeral Expense Life Insurance

There are two main types of funeral expense life insurance: burial insurance and preneed funeral insurance. Burial insurance offers a modest death benefit, typically ranging from $5,000 to $25,000, to cover funeral, burial, or cremation costs. On the other hand, preneed funeral insurance pays the death benefit directly to the funeral service provider, allowing you to lock in pricing.

Advantages of Funeral Expense Life Insurance

Considerations for Funeral Expense Life Insurance

It is important to note that funeral expense life insurance policies may have limitations and restrictions. For example, the death benefit may be limited to a maximum of $25,000, and the policies tend to be more expensive compared to other types of life insurance. There may also be a waiting period, typically of two years, during which the full death benefit is not payable if the insured passes away due to a medical issue.

Case Study: Sarah's Journey

As a 62-year-old woman facing the challenges of a terminal illness, Sarah struggled to find life insurance coverage. She ultimately opted for funeral expense life insurance, which provided a death benefit of $15,000 specifically intended to cover her funeral, burial, or cremation expenses. By choosing this type of policy, Sarah could ensure that her family would not be burdened financially by her final arrangements.

In conclusion, while the options may be limited, funeral expense life insurance can be a valuable solution for terminally ill individuals seeking to provide financial protection for their loved ones. It helps cover end-of-life expenses and ensures that your family can focus on their well-being during a difficult time.

Final expense life insurance

Final expense insurance is an option for those who are terminally ill and seeking life insurance. While options are limited for those seeking life insurance in this situation, final expense insurance is one of the policies available for high-risk individuals.

Final expense insurance is a type of whole life insurance policy, but it is typically less expensive and designed to help loved ones prepare for costs that arise in the final stage of life. Final expenses can quickly add up to thousands of dollars, and having a final expense insurance plan can ease the financial burden, allowing your family to focus on healing.

Final expense insurance offers competitive, fixed premiums that do not change over time. The cash benefit can help cover funeral and burial costs, medical needs, legal and accounting costs, or anything else that will help loved ones.

To apply for final expense insurance, you will need to answer a few health questions. Some plans may require a formal medical exam, but final expense insurance usually only requires a brief health questionnaire. You will also need to choose a death benefit amount that suits your needs. This can be calculated by looking at your monthly household expenses, immediate needs, and potential funeral expenses.

It is important to note that final expense insurance policies have high premiums and typically do not pay out more than $25,000 in death benefits. However, they can still help cover end-of-life costs and provide peace of mind for individuals and their families.

Group life insurance

If you have a terminal illness, your options for group life insurance will be limited to any group life insurance offered by your employer or other trade organizations. Group life insurance covers multiple people and is usually provided by an employer for free or at a subsidised rate.

However, there are some disadvantages to group life insurance. The amount of coverage you get is often less than what you need, and you usually cannot keep the coverage when you change jobs. Additionally, you have to accept the insurance provider chosen by your employer or organization.

If you already have an active life insurance policy, you may be able to add an accelerated death benefit rider, which allows you to withdraw part of the money from the death benefit if you have received a terminal diagnosis. This rider is often included at no additional cost, and the money can be used for any purpose, including medical bills.

Accelerated death benefit rider

An accelerated death benefit rider is a life insurance policy add-on that allows you to access your policy's death benefit before you pass away if you are diagnosed with a qualifying serious illness, typically a terminal one. This rider is designed to help alleviate financial stress during challenging times. The money you receive via the rider will be deducted from your death benefit.

Every insurer has different requirements, so it's important to understand which terminal illnesses or circumstances can qualify you. Some insurers may also allow it to be activated if you need to go into a nursing home or if you develop a critical or chronic condition.

Once your accelerated death benefit rider has been activated, you might be allowed to use anywhere from 25% to 100% of your death benefit while you are still alive, depending on your insurer and policy. You can typically use the payout for anything you want, from paying for a private nurse to covering travel expenses. However, tax implications may vary depending on your circumstances. Any portion you don't withdraw will be paid out to your beneficiaries once you pass away, but premiums must still be paid for the benefits to be paid upon the insured's death.

While insurance riders are typically considered add-ons that come at an extra cost, accelerated death benefit riders are sometimes included in life insurance policies for no additional charge. Many of these riders, however, treat the accelerated benefits like a policy loan. As a result, the eventual death benefit left over is calculated by subtracting the accelerated amount and the interest charged against it from the initial death benefit.

If your existing policy does not include an accelerated death benefit rider, you can ask your insurer if it can be added. Note that adding the rider may increase your premium.

Frequently asked questions