When looking at different types of life insurance, many people will consider those with terminal illness cover. This means that if you develop a terminal illness, then your life insurance policy will pay out prior to your death.
It is very important to check the details of individual life insurance policies to see where you stand with regards to issues such as terminal illness.
Many people aren’t aware, but it is possible to receive a life insurance payout if the policyholder was to develop a terminal illness. This can obviously prove very useful in helping to cover any additional costs, income shortfalls and also restructuring finances to ensure your family is provided for after your death.
It is very dangerous to assume that all life insurance policies will have this condition written into the small print – check before signing.
Why Would a Life Insurance Company Payout Before Death?
When an individual is diagnosed with a terminal illness, there is every chance that their life insurance policy will provide an early payout. This allows the individual to cover any short to a medium-term shortfall in income and also restructure their finances to ensure a degree of stability for their family on their death.
This is a life-changing situation which is appreciated by life insurance companies.
What Is the Timescale for a Terminal Illness?
Terminal illness cover relates to medical conditions where the individual has less than 12 months to live. Obviously, any request for early payment would require medical support to confirm the individual had been diagnosed with a terminal illness.
Are Pre-Death Payments Paid Out Automatically?
The claims process regarding pre-death payments is similar to that for a beneficiary staking a claim after the death of the policyholder. The relevant supporting paperwork must be provided to the life insurance company at which point they would look to make a swift payment.
How Long Will I Wait for a Pre-Death Life Insurance Payment?
In the event that you are diagnosed with a terminal illness, as soon as the appropriate supporting documentation is provided, your insurance company would look to make a quick payment.
The life insurance company will be well aware that you may be facing financial challenges as a consequence of your terminal illness and the potential impact on household income.
What if a Life Insurance Holder Lives Longer Than 12 Months After a Payout?
Even if you were to live longer than 12 months after a terminal illness diagnosis, and you received a life insurance payout, you don’t have to pay the money back. In reality, the life insurance policy would have been closed after the terminal illness diagnosis payment.
Are There Occasions When a Life Insurance Policy May Not Payout on a Terminal Illness?
Assuming your life insurance policy also supports terminal illness cover, there are a few occasions, other than pre-diagnosed conditions, when a policy would not payout. However, you may find that terminal illness cover does not apply within the first 18 months of the policy.
This helps protect insurance companies from individuals taking out life cover when they suspect they may have a life-threatening condition.
What if My Life Expectancy Is More Than 12 Months?
This will vary from policy to policy, but in general, if you have a terminal illness diagnosis with a life expectancy of more than 12 months, the policy may not payout. This is by no means set in stone, and again it is very important to ask the question when arranging your life insurance.
Do All Life Insurance Policies Have a Terminal Illness Cover?
When you are looking at life insurance policies, it is very important to ask about terminal illness payments. While the majority of life insurance policies will have terminal illness cover, this should not be taken for granted.
If you were to incorrectly assume that terminal illness cover was part of your life insurance policy, there could be serious financial consequences.
Who Receives Life Insurance Payments Before Death?
Traditionally it is the policyholder who will receive any life insurance payment before their death. This will ensure they have additional funds to cover a potential income shortfall if they are unable to work and household income is seriously impacted. If the holder so wishes, part of the payment could be made to a third-party once they have received the payout.
