What is Terminal Illness Cover in Term Insurance?

What is Terminal Illness Cover in Term Insurance?

Terminal illness cover is an additional feature or a rider in a term insurance plan that pays out the partial or full sum assured on diagnosis of terminal illnesses. The terminal illnesses listed in the policy documents are covered under the plan, which typically lists terminal illnesses in which life expectancy is 12 months or less.

It is important to note that the terminal illness cover is different from that of critical illness cover offered by many insurance companies as an add-on under a term insurance plan. Critical illness cover pays out a specific sum assured (coverage amount) on diagnosis of critical illnesses like cancer, stroke, heart disease, etc. On the other hand, terminal illness cover provides compensation for life-limiting conditions like organ failure, advanced stage of cancer, etc., with a limited lifespan (as certified by the medical professional).

Let us take an illustration to understand how terminal illness coverage in term insurance works. Let us assume Raj, a 42-year-old marketing professional who works in Mumbai, has bought an INR 2 Cr. term plan with terminal illness benefit. Suppose he is diagnosed with a rare form of motor neuron disease. A doctor who is treating him certifies that he is likely to live less than six months. As per the terms of his term insurance policy, the insurance company compensates him with INR 2 Cr (100% sum assured) on diagnosis of this terminal illness. Raj can utilise this lump sum for his treatment cost, to repay debt, caregiving cost, and set aside some amount for children’s education. On the passing away of Raj, no additional benefit will be paid to his dependents, as the early payout is made at the time of diagnosis. Having terminal illness cover in term insurance ensures financial support when you face the toughest challenge while alive, not after.

Features of Terminal Illness Cover in Term Insurance

The following are the key features of terminal illness cover in term insurance:

• Early payout: Insurance company compensates the partial or full sum assured ( as per the term of the policy) immediately after the diagnosis of the terminal illness. This helps the family to manage the immediate financial requirement, along with maintaining stability for the future. Some policies may pay 50% on diagnosis and the remaining on the death of the policyholder.
• Diverse coverage: The terminal illness cover in term insurance includes some of the common life-limiting conditions like end-stage cancer, severe neurological illnesses, advanced organ failure and terminal illnesses like AIDS detected at the final stage.
• No restriction on end-use: The insurance companies do not put any restriction on the usage of funds paid on the diagnosis of terminal illnesses in term insurance. The amount can be utilised for any purpose, including medical treatments, securing children’s future or for repayment of debt.
• No waiting period: Unlike critical illness riders that usually come with a waiting period to get the compensation, terminal illness cover often has no waiting period. The benefit begins as soon as the policy is issued.

However, it is important to note that one needs to produce medical certification, such as a diagnosis report, a certificate from one or more medical professionals or specialists, or a medical document that mentions the progressive and life-limiting nature of the disease with a life expectancy of less than a year.

Benefits of Terminal Illness Cover in Term Insurance

The following are the important benefits of terminal illness cover in term insurance:

• Financial protection: Early payout of the sum assured before death gives much-needed financial protection to the insured and their family at the right time. Studies show that Indian families face catastrophic financial expenditure on the diagnosis of terminal illnesses and any critical illnesses. Providing the compensation at that time protects families from depleting their savings and falling into a debt trap.
• Reduces emotional stress: Financial support helps in reducing emotional stress to some extent. India faces an increasing risk of cancer, with 14 to 15 lakh new cases added each year and most being diagnosed at an advanced stage. Having financial security during such a painful time gives a little emotional relief.
• Helps maintain quality of life: Individuals diagnosed with terminal illnesses require caregiver support, modification at home, expensive medical care and more. Terminal illness cover helps in maintaining the quality of life.
• Quicker payout: Terminal illness claims in term insurance are processed much faster than death claims, as the policyholder and family also hurry the documentation submission to get the financial support quickly.
• Cost-efficient add-on: Terminal illness rider or add-on is the most cost-efficient rider that offers major value at a lesser price.

At Jio Insurance Broking, you can explore term insurance with terminal illness cover offered by various insurance companies. You can compare their cost, coverage and other features to buy the best term plan with terminal illness cover.

Should You Opt for Terminal Illness Cover in Term Insurance?

Generally, terminal illness cover in term insurance comes at a cost of 5 to 10% of the base premium. People with a family history of critical illnesses and terminal illnesses can consider buying this rider, as it enhances the financial protection offered by term insurance at minimal additional cost. It is also an ideal choice for high-income-earning individuals with higher responsibilities and lifestyle. Final stage support given by terminal illness in term insurance makes it an essential feature or rider for each breadwinner. That means, terminal illness cover is indispensable for individuals with higher responsibilities, outstanding debts and a family history of any life-threatening illnesses.

Conclusion

Term insurance is an important necessity for every individual to financially safeguard their family’s future. Terminal illness cover may not be your top priority while buying a term insurance policy, but it is a most essential feature or rider to consider to ensure financial stability during the worst phase of life. A small extra cost that you incur at the time of availing term insurance can be a great support, emotionally and financially, during the hardest time.