What is a Terminal Illness Rider on a Life Insurance Policy?

When you purchase life insurance, you are likely doing so to provide financial security to your loved ones in the event of your untimely death. However, what happens if you become terminally ill and require significant medical attention prior to your death? This can lead to significant expenses that you and your family may be required to pay before you die. While you can be assured that your family will have the money they need after you die, what about the money they need leading up to your death?

A Terminal Illness Rider Pays a Benefit Before Death

In these types of circumstances, a terminal illness rider on a life insurance policy can provide much-needed financial support.

A terminal illness rider is one type of an accelerated benefit rider that is added to a life insurance policy which allows the policyholder to access a portion of their death benefit while they are still alive if they have been diagnosed with a terminal illness. This rider is designed to provide financial support to the policyholder and their family during such times of extreme hardship.

How Does a Terminal Illness Rider Work?

If a policyholder is diagnosed with a terminal illness and is expected to pass away within a certain period of time (usually 12 months or less), they can request an advance on their life insurance death benefit before death. The policyholder can then use these funds for any purpose they see fit, such as paying for medical bills, living expenses, family gatherings, or end-of-life arrangements.

By accessing the death benefit through a terminal illness rider, it will then reduce the total payout to the policyholder’s beneficiaries upon their death. For example, if a policyholder has a $500,000 life insurance policy and accesses $100,000 through the terminal illness rider, the beneficiary will receive $400,000 upon the policyholder’s death.

Will a Terminal Illness Rider Be Included in My Policy?

The vast majority of new life insurance policies now offer a terminal illness rider as a standard feature at no extra cost. However, there is typically a one-time administrative fee to access this benefit that is deducted from the amount withdrawn, which generally does not exceed $500.

In conclusion, a terminal illness rider on a life insurance policy can provide invaluable financial support during the emotionally and financially challenging time following the diagnosis of a terminal illness. It allows policyholders to access a portion of their death benefit while they are still alive and likely in need of immediate and significant financial support.

Contact CEG Life Insurance Services for Expert Advice

If you are considering the purchase of a life insurance policy, make sure you ask your agent about adding a terminal illness rider to it. At CEG Life Insurance Services, we offer expert advice on all things related to life insurance. Contact us today for a free consultation to get all the help you will need to purchase the right life insurance policy for you and your family.