Should You Take Terminal Illness Cover With Term Insurance?

We’ve been writing about term insurance for over a year now. If you’ve read our previous articles on term insurance, you’d know term insurance is a death benefit plan. Meaning, it pays a fixed sum of money to your family if you pass away during the policy term. In case you survive, there’s no payback. 

What if we tell you that you can receive the term insurance claim while you’re living. Yes, you read that right. A few term insurance policies provide a terminal illness benefit under which you’ll receive the term insurance claim while you’re alive. The claim, however, will only be paid if you’re diagnosed with a terminal illness.  

We’re sure you may have a lot of questions. What is the terminal illness benefit? How does it work? And most importantly, should you buy a term insurance plan with this benefit? 

Before we find out the answers to these questions, let us first understand what is a terminal illness. 

What is a Terminal Illness?

Terminal illness is an illness or a condition that, according to a medical professional, you are likely to never recover from. It is an illness that is likely to result in your death in 6 months. 

Here are a few examples of terminal or life-limiting illnesses/ diseases - 

• Advanced Stage Cancer
• Advanced Heart Disease
• Lung Disease
• Liver Disease
• Motor Neuron Disease
• Neurological Disease
• Dementia
• Stroke
• HIV/ AIDS

What is Terminal Illness Benefit in Term Insurance? How does it work? 

When you’re diagnosed with a terminal illness, a competent doctor in that field is required to give a declaration in writing to confirm your shorter life expectancy. As soon as a medical practitioner confirms that you’ve been diagnosed with a terminal illness, you’ll have to notify the insurance company. 

The insurer may run the terminal illness certificate past their internal team of doctors & validate the declaration. The insurance company will then pay the term insurance claim to you while you’re still alive. 

For instance, say Ishaan buys a term insurance cover worth INR 1 Crore. His policy has an in-built terminal illness cover. A few years later, Ishaan is diagnosed with terminal lung disease. He submits the terminal illness certificate given by his doctor to the insurer, who’ll evaluate and pay the INR 1 Crore claim to Ishaan while he’s still alive. 

How is a Terminal Illness Cover different from a Critical Illness Cover?

If you buy a term insurance policy with the terminal illness benefit, you’ll receive the term insurance claim while you’re alive - if you are diagnosed with an illness that is incurable and likely to lead to death. 

If you take a critical illness rider with your term insurance, you’ll be paid a fixed sum of money if you’re diagnosed with a serious but curable illness that is listed in the policy document. And if you pass away during the term of your policy, the term insurance claim will be paid to your family. 

Say Ananya buys a term cover of INR 1 Crore with a critical illness rider worth INR 10 Lakhs along with it. She gets diagnosed with Stage-I Cancer, which is listed in her policy document. So, Ananya will get the critical illness benefit of INR 10 Lakhs on the diagnosis. And in case she passes away while her term insurance policy is active, her family will get the term insurance claim of INR 1 Crore.

Should I Take A Terminal Illness Cover With Term Insurance?

To avail of the terminal illness benefit with your term insurance, you’ll have to submit a terminal illness certificate to the insurance company. Getting this certificate, however, is very difficult. Most doctors have stopped issuing the certificate as it has now become possible to treat any and every disease today - because of the advancement in medical science. Even diseases that were once incurable!

Now, imagine a scenario where a disease that is considered incurable by one doctor may be treated by another doctor. For instance, say a doctor gives you a terminal illness certificate, which you submit to the insurer who pays you the term insurance claim. After a few days, you consult another doctor who tells you the disease you’re diagnosed with is curable, gives you the required treatment, and treats you. This would mean a loss for the insurer as they’ve already paid the claim to you. And, the first doctor who gave the terminal illness certificate may have to face severe consequences too. Hence, most doctors have stopped issuing the terminal illness certificate. 

So, it doesn’t matter whether you opt for the terminal illness benefit with your term insurance or not. In our opinion, if the terminal illness cover is available as a rider and you’re asked to pay an additional premium, don’t opt for it. If the benefit is available with your term insurance at no extra cost, take it. 

One significant advantage of an inbuilt terminal illness cover is it gives you peace of mind, as you can get the term insurance claim in your lifetime and be completely sure of your family’s financial security. 

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