Life Insurance for the Terminally-ill Author:    Posted under: Life InsuranceLife Insurance questions answeredLife Insurance Types


One can never know when a life-threatening situation will come.  If are diagnosed with a terminal illness or chronic illness, or you had an accident that left you in a critical condition, you have the option to make a financial decision that can make things better for you and your loved ones. Whether you are already a policyholder (a person who holds an insurance policy) or you are just about to purchase a life insurance, you may opt for the Accelerated Death Benefit, also known as the Living Benefit.

The Living Benefit was first offered to HIV/AIDS patients in 1980s. Since then, it has expanded to include a number of terminal illnesses such as cancer, stroke and kidney failure. According to the U.S. Department of Health and Human Services, you are entitled to the living benefit insurance if you have been diagnosed with a terminal illness, chronic illness or any physical condition where death is likely to occur within a specified amount of time, such as 24 months. If you will be permanently confined to a nursing home and you will be unable to perform “activities of daily living” such as bathing or eating, you may take advantage of this benefit. This insurance for the terminally ill can be added to your life insurance policy, either at the time of purchase or after. You may qualify for a tax-free exemption, only if you are classified as terminally ill when you file your income taxes.

Before you approach an insurer you may want to discuss your situation with your hospital consultant so that you have some idea of the medical opinion the insurer will be given. Make informal enquiries with a number of companies first, because you can be turned down if you make a formal application. If you are reluctant to go through with this by yourself, you may seek the help of a financial adviser or insurance broker. They have the advantage of knowledge of the whole market. Make sure you get a trusted adviser and divulge all relevant information to your broker so that the company cannot cancel your policy on the grounds that they were not properly informed.

Life insurance for the terminally ill typically pays out 50 to 80 percent of the policy’s face value, according to the Illinois Department of Insurance. Some states allow insurance companies allow policyholders who may not be terminally ill but have certain medical conditions like heart attack, Alzheimer’s disease or organ transplant. If you want your beneficiaries to receive the remainder, you must keep paying premiums to keep the policy in force. The insurer will charge interest on what you receive from a living benefit. This will reduce the amount your beneficiaries receive after your death. Some insurers limit the amount of the death benefit you can receive by setting a maximum percentage that may be taken as a living benefit or by capping the dollar amount.

Purchasing a life insurance at a critical time of your life can be of great value. However, if not thoroughly reviewed, you may come short of what could be a full benefit which you can leave to your loved ones.

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