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A terminal illness diagnosis can have a devastating impact on a person and his/her family. Regular hospital visits, doctor treatments, surgeries, medications, and other related expenses can affect his/her finances in such cases. With a good lifestyle and other precautions to avoid health-related issues, one should also buy terminal illness benefits in term insurance. This rider can help the policyholder secure themself for the long term, pay off any expensive hospital bills, and also seek medical help outside India without worrying about their financial situation, which can ultimately improve their survival chances.
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These benefits help to secure our lives while protecting our families financially. Let’s understand in detail the terminal illness meaning and its benefits:
A terminal illness is a condition or an illness that can’t be cured and is likely to lead to death.
Terminal Illness Meaning – A terminal illness in term insurance is considered valid if two certified doctors confirm the policyholder’s diagnosis of a terminal illness, i.e., an untreatable condition that reduces the policyholder’s life expectancy to less than 6 months. In simpler words, the terminal illness meaning in insurance is that if the policyholder is diagnosed with a terminal illness during the policy term, he/she will either receive the entire or a part of the base sum assured to seek better medical treatment and cover the hospital charges. The payout amount on the diagnosis of a terminal illness depends on the policy’s T&Cs, and thus, you should go through the policy documents before adding the rider to the base plan.
Term Plans
Now that we have a clear insight on what is the terminal illness meaning, let’s understand the relevance and importance of terminal illness in term insurance.
A terminal illness benefit is an insurance rider that is defined as an attachment to an existing term insurance plan that provides coverage in addition to the base policy. Riders are mainly designed to enhance coverage by paying an additional premium. Terminal illness meaning – It is an untreatable condition, i.e. it cannot be cured and is likely to lead to the patient’s death. And, in term insurance, the terminal illness benefit provides you with a tax-free lump sum amount in case of the diagnosis of a terminal illness. In case you are diagnosed with a terminal illness, you will be provided with a guaranteed amount which, in the future, can be used to take care of any hospital bills or medical expenses. As we already know, the medical treatment for a terminal illness is expensive, but the early payout on terminal illness riders can help you pay off the hefty bills without it draining your savings.
Let us understand how the accelerated death benefit rider works using an example:
Suppose Rajan bought a 1 crore term insurance with the optional terminal illness cover included in the base plan. Now he pays the minimal premium for the terminal illness rider (refer to terminal illness meaning mentioned above for a better understanding) along with the base premiums and receives enhanced coverage for the entire policy term. After 5 years, Rajan is diagnosed with a heart disease that is untreatable and is termed by doctors as terminally ill with only 6 months to live. The insurer pays the entire 1 crore sum assured in advance, and the policy terminates. Rajan uses the payout amount to seek medical help from specialists in other parts of the world and gets world-class treatment without worrying about his finances.
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Now that you’ve understood the terminal illness meaning, let’s discuss the terminal illness benefit and how it's an important term insurance rider because of the following reasons:
Financial Security: The accelerated death benefit rider or the terminal illness benefit provides the policyholder and their family with the financial aid that they need to take care of their hospital bills, medication costs, and lifestyle expenses and pay off any remaining financial needs and obligations.
Long Protection: Terminal illness meaning in term insurance is quite simple. It provides cover against the terminal illness for the long term. Most term insurance plans offer protection against terminal illness till 85 years of age of the policyholder.
Secure Savings: With the terminal illness benefit payout, you would not have to dip into your savings to pay for any expenses. You can keep your savings safe and secure and pay for your financial obligations using the benefit amount.
Pay off Hefty Bills: The payout can help the policyholder seek the best medical help available, whether it is in India or overseas. They can simply pay for the expensive hospital bills using the payout received and improve their chances of survival.
Peace of Mind: Knowing that there is a terminal illness benefit in place provides policyholders with peace of mind. It relieves the anxiety and uncertainty associated with the financial implications of a terminal diagnosis. This peace of mind allows individuals to focus on their emotional well-being, spend quality time with their loved ones, and make important end-of-life decisions without the added stress of financial concerns.
Terminal illness benefit is an important term insurance rider and is needed in your base term insurance plan to cover multiple risks. Here is a list of all the ways in which a terminal illness or accelerated death benefit rider can benefit you during the policy term:
Terminal illness benefits or the accelerated death benefit rider in term insurance plans are either inbuilt within the plan or are available at really affordable premium rates. This term insurance rider can be added to the base term plans at nominal premiums, which can be paid along with the base premiums and receive a large life cover at really low premiums.
Terminal illness benefits taken along with the term insurance plan offer various advantages, such as it protects you against any uncertain event and also covers routine medical test payments and medical expenses. Some of the term insurance plans also offer an option of ROP i.e., Return of Premium. If in case you outlive the plan, you will get all the premium amounts that you have paid throughout the policy tenure at the time of maturity. Many people are rendered unable to continue their jobs after being diagnosed with a terminal illness, and thus the terminal illness benefit payout can help them meet their daily expenses and pay their rent and child’s fees.
The terminal illness benefit payout can help the policyholder fund the expensive treatments and surgeries to improve their condition and pay for new consultations overseas for a better chance at survival. With this payout, the policyholder can focus on getting the required treatments without worrying about financial issues.
The policyholder can use the accelerated death benefit rider payout to pay off their remaining loans and debts like student loans, home loans, car loans, or any other debts they may have availed of. This ensures that the policyholder's family isn’t burdened with paying off these loans and liabilities in the policyholder’s absence.
Terminal illness benefits in a term insurance plan provide you with dual tax benefits. The premiums paid for these terminal illness coverages and a term plan are exempted in U/S 80C and 80D of the Income Tax Act, 1961. It is important to note that the term insurance tax benefits are subject to change as per the prevailing tax laws.
*Note: If you want to know your term insurance premium, quickly check it using the term insurance calculator.
Here is a list of individuals who should consider adding the terminal illness benefit to their term insurance plans:
|
Category |
Reason for Considering Terminal Illness Benefit |
|
Main Earners with Dependents |
Ensures financial support for the family during a critical time, providing funds to cover living expenses, education, and future needs even before death. |
|
Individuals with a Family History of Serious Illness |
Offers peace of mind and financial security, especially if there’s a genetic predisposition to life-threatening conditions like cancer or heart disease. |
|
People with Large Debts or Loans |
The payout from terminal illness benefit can help pay off home loans, personal loans, or business debts, reducing the financial burden on the family. |
|
Self-Employed or Business Owners |
Helps cover business continuity or wind-up costs if the individual can no longer run the business, ensuring their family isn’t left with financial liabilities. |
|
People with High Medical Expenses |
Terminal illness benefit provides financial support for ongoing treatments, palliative care, or home care, helping to manage the high costs associated with terminal conditions. |
|
Young Professionals Starting a Family |
Early in life, terminal illness in term insurance can provide a strong foundation for long-term security, especially with growing financial responsibilities. |
|
Senior Citizens Planning Retirement |
Provides financial support for medical care in case of terminal illness in term insurance, ensuring savings and retirement funds are not depleted. |
|
Non-Resident Indians (NRIs) |
NRIs with families in India can ensure their loved ones have financial protection against both medical expenses and the loss of income in case of terminal illness. |
|
Individuals Without Extensive Health Coverage |
For people who may not have sufficient health insurance, terminal illness benefit acts as an additional layer of financial support, reducing the strain on personal savings. |
It is important to understand the terminal illness meaning and critical illness meaning before we understand their core differences. Here are the differences between terminal illness vs critical illness
| Parameter | Terminal Illness | Critical Illness |
| Meaning | The terminal illness meaning is as follows: It is a medical condition with no cure that can ultimately result in death. Despite medical efforts, the illness will worsen and impact overall well-being. Examples include advanced cancer, end-stage organ failure, advanced Alzheimer's disease, and neurological diseases. |
The critical illness meaning is as follows: Critical illness is a serious medical condition that urgently needs attention and can severely harm vital organs. Immediate medical help is crucial to prevent worsening and save your life. Examples include cancer, stroke, heart attack, and organ failure. |
| Focus of treatment | The treatment can help with symptoms, offer comfort, and enhance your quality of life. | The treatment aims to maintain good health and save your life. |
| Recovery | No chance of getting better, and it may lead to unfortunate death. | Likely to recover if treated promptly. |
| Insurance claim benefits | For terminal illness insurance benefits, you can claim if diagnosed with a company listed terminal illness and your life expectancy is less than 12 months. | Your critical illness insurance benefits, you can claim when diagnosed with a company listed critical illness, and hospitalization is not required to claim the benefit. |
| Sum assured in Term Insurance | Terminal illness insurance may cover up to 50% (or sometimes 100%) of the sum assured for treatment. In case of 50% payment, the rest will be paid to nominees upon death. |
Critical illness insurance offers the sum assured as a lump sum or another payout for medical and hospitalization costs. |
*Note: You should first know what is term insurance and then buy term plan with terminal illness and critical illness benefits.
The terminal illness benefit is a term insurance rider that you can add to your base term plan that provides coverage in addition to the policy if you are diagnosed with a terminal illness. Whereas an accelerated terminal illness benefit is a rider in term and life insurance plans that allow individuals with a terminal illness to receive a part of their death benefit before they unexpectedly pass away. The purpose of an accelerated terminal illness benefit is to assist in covering medical expenses and related costs. However, receiving this rider benefit early, i.e. during diagnosis/treatment of the policyholder, results in either a complete or certain deduction of the total death benefit amount, depending on the T&C of different insurers.
Terminal illness meaning and benefits in a term insurance plan are beneficial as the additional coverage protects you against different risks. If you want to buy term plan with terminal illness benefits, choose a plan that best suits your requirements. These rider plans offer comprehensive coverage to ensure that you should always remain safeguarded against critical times.
†Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in
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