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What is a Terminal Illness Rider and why do I need it?

10 Oct 22      |       | ShareShare Share Blog Or copy link Copy Share this link via

Authored by: Anurag Ainapurapu
Reviewed by: Krupa Kenia

The Long Read


Everything you *need to know* is right above this. Scroll down, only if you'd still like to read more (honestly, why?)

As you know, when you buy term insurance, your nominee will get the policy money only after you pass away during the policy duration.
 

But what if you are unfortunately diagnosed with a terminal illness during the policy duration?
 

  • How can you afford your treatment? 

  • What about the cost of your palliative care?
     

The Terminal Illness Rider will provide financial assistance to you and your family in this case by ensuring you and your family get the term policy payout immediately upon the diagnosis of your life-threatening illness and not after your death during the policy duration. 

The Terminal Illness rider ensures your family has immediate access to the insurance money as soon as you’re diagnosed with a life-threatening illness.
 

Let’s understand with an example:
 

With a life cover of ₹ 1 crore and a Terminal Illness Rider, you get ₹ 1 crore immediately upon the diagnosis of a life-threatening illness.
 

So, you should buy a Terminal Illness rider if you want to:

  • Cover the cost of treatment/palliative care

  • Help your family plan the best use of the insurance money while you are still around

If you are eligible to buy term insurance, then you are eligible to buy the Terminal Illness rider.

You’ll be happy to know that the Terminal Illness Rider comes at a very low or no extra cost. In fact, some insurers may even include it within your base term policy aka as a feature of your plan. 

You can opt for the Terminal Illness Rider when applying for a term plan from a life insurance company of your choice. The final process will, of course, vary from insurer to insurer. 
 

You can also buy this rider on your policy anniversary date. 

Good news! The Terminal Illness rider will cover you for the entire duration of your term plan.

Yes, you can.

But you can only do it on the date of your policy anniversary.  However some insurers may not offer certain riders if you want to buy them after buying your term policy. So it’s best to check with your insurer about when you can buy the terminal illness rider. 
 

Find out more about buying riders after buying a term policy in detail.

 

No. The Terminal Illness rider is an Accelerated Rider which means, you will get only your original life cover amount and no additional amount. But you will receive the insurance money early, before the policy duration is over. 

Some of the exclusions in this rider are: 
 

  • Pre-existing disease

  • Congenital Infection

  • Participation in war, riots or rebellion activities

  • Attempt to suicide or self-inflected injuries

  • Participation in criminal activities and/or dangerous activities 

 

Speak to your insurer to check the complete list of rider exemptions. 

Yes. You can get double the tax benefits* on this rider. The premiums you pay for this plan are exempted from tax under Section 80C and 80D of the Income Tax Act, 1961.

*Tax benefits & exemptions are subject to conditions of the Income Tax Act, 1961 and its provisions and tax Laws are subject to change from time to time. You are requested to seek tax advice from Chartered Accountant or personal tax advisor with respect to personal tax liabilities under the Income-Tax law

Yes, you can remove the rider on your policy anniversary. But remember, once you remove this rider, you will lose its benefits and you may not be able to add it back again.* That’s why, remove the rider only if you are very sure that you no longer require it. 
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*May vary from insurer to insurer

You can consider buying this rider if you want your family to receive the policy payout immediately upon the diagnosis of your terminal illness. In this way, you may be able to avail the best palliative care for yourself as well as help them in managing the money before you pass away. 
 

Use the KlarifyLife Term Guide to determine whether you should buy the terminal illness rider. 

Well, there’s no rule for this. A critical illness rider will provide an advanced payout from your life cover that can help with your critical illness treatment or be used for covering your lost income (during the period of critical illness). It will not give the complete payout of your life cover if you’re diagnosed with a terminal illness. Your family will only get the payout when you pass away. The terminal illness rider will give the complete life cover payout in advance when you are diagnosed with a terminal illness. 
 

So, check what your needs are or your preference is and decide accordingly. 

Yes, the terminal illness rider will cover you for the entire policy period.

The terminal illness rider does not waive your premiums when you are diagnosed with a terminal illness, in fact there’s no need to pay premiums if you’re diagnosed with a terminal illness and you have this rider. The rider will ensure that as soon as you’re diagnosed with a terminal illness, your nominees get the life cover payout.

Would your health insurance plan give you an advanced payout that’s enough to secure your loved ones’ financial future when you pass away? Probably not right, it may be used for paying the hospital bills. But the terminal illness rider will give an advanced payout of your term insurance policy life cover if you get diagnosed with a terminal illness and if you want this to happen, opt for a terminal illness rider even if you have a health insurance policy.

Yes, you may be still eligible to buy a terminal illness rider now. You need to check with your insurer on this.  

If you don’t pay your premiums on time, not only will you lose your terminal illness rider benefits, you’ll lose the validity and benefits of your term plan as well. 

That’s why it's essential that you pay your term insurance premiums on time. You can enable auto pay at your bank to help you make the premiums automatically when they’re due. 

What happens if the insurance premium is not paid? Find out.

Here’s what your nominees need to do to claim the terminal illness rider benefits: 

  • Inform the insurer about the terminal illness of the policyholder

  • Submit the medical certificate declaring that the policyholder is terminally ill 

Yes, certain insurers may provide the terminal illness rider with the base term plan without any additional costs. It’s best to check with your insurer if they provide such a facility.

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