Terminal Illness Coverage in Term Insurance
Terminal illness is a life-threatening disease that cannot be fully treated and eventually leads to the patient's death. Diseases like cancer, motor neurone disease (MND), advanced heart disease, neurological diseases, and lung disease fall into this category.
If there's a higher chance of you becoming terminally ill in the future, especially if your family's medical history shows multiple members affected by critical illnesses, then terminal illness insurance cover is highly recommended. You can add this as an add-on rider to your base plan or purchase a term plan with an in-built terminal illness benefit. This allows you to claim an early payout of the death benefit if diagnosed with one of the listed terminal illnesses.
What is a Terminal Illness Benefit?
Treatment for terminal illnesses can be very expensive, potentially leading to a financial crisis for the patient's family. Therefore, it's advisable to buy a term insurance policy with a terminal illness benefit or rider, allowing the insured person to claim a portion of the death benefit while still alive.
The nominee will still receive the remaining death benefit after the policyholder's demise, minus the terminal illness claim amount. Some insurance providers offer up to 25% of the life cover to policyholders if their life expectancy is assumed to be less than 12 months.
Benefits of Buying Terminal Illness Cover in Term Insurance Plan
Terminal illness riders and accelerated death benefit riders offer numerous financial benefits to an insured person suffering from a terminal disease.
Here are the top benefits of terminal illness cover that can benefit you throughout the policy tenure:
Flexibility to Claim a Part of Life Cover
The rider offers the flexibility to claim a tax-free lump sum amount from your life cover upon diagnosis of a terminal illness.
Additional Life Cover at Low Premium Rates
Terminal illness benefits are available as add-on riders in term insurance plans. Sometimes, it's an in-built feature of the base plan, or you can purchase it as a rider for an additional premium. It may cost around Rs. 400 to Rs. 500 monthly, providing additional life cover and extra protection against terminal illness.
Flexibility to Use Terminal Illness Insurance Cover
You can use the terminal illness insurance coverage to pay for medical and hospital expenses during treatment. This helps an insured person undergo medical treatment without worrying about their financial situation.
Tax Benefits
A terminal illness rider in a term insurance plan offers tax benefits. Under Sections 80C and 80D of the Income Tax Act, 1961, the premium paid towards terminal illness benefits is tax-deductible, which can help reduce your annual tax liability.
Difference Between Terminal Illness vs Critical Illness Benefit in Insurance
People often misunderstand terminal illness and critical illness benefits as the same. Here are the key distinctions between Terminal Illness and Critical Illness in term insurance:
| Terminal Illness | Critical Illness |
| Terminal illnesses cannot be fully treated and eventually lead to death. Extensive treatment aims to ease symptoms or provide extra time with loved ones. | Critical illnesses can be fully treated with extensive medical intervention to normalize health conditions and save lives. |
| Life expectancy for terminal illness is low, and it may eventually lead to death. | Critical illnesses can often be cured, with high chances of recovery through proper medical treatment. |
| You can claim a terminal illness insurance benefit upon diagnosis of a qualifying terminal illness. Claims are typically accepted if your life expectancy is 12 to 24 months. | You can claim a critical illness insurance benefit upon diagnosis of a qualifying critical illness. This benefit does not consider the policyholder's life expectancy; it only considers a survival period of 30 days and diagnosis reports. |
| Under terminal illness insurance, you might receive 25% to 50% of the death benefit as a terminal illness benefit to cover medical expenses. The remaining life cover will be paid to the beneficiaries as a death payout. | Under critical illness insurance, you can claim a tax-free lump sum amount from your life cover upon diagnosis of a critical illness. You can use this benefit payout to cover medical and hospitalization expenses. |
| It can be added as a rider to the policy or purchased as an in-built cover within a term plan. | It can be added as a rider to the policy or comes as an in-built cover in term insurance plans. |
Conclusion
A terminal illness feature with a term insurance plan is an ideal option for those who have a higher chance of developing terminal illnesses in the future. Some insurance providers offer terminal illness benefits in a base plan, or you can get this benefit as a rider attached to the base term plan for additional premiums. These added benefits ensure you are always protected against life-threatening diseases.
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