Life Insurance When Terminally Ill

Hello All,

Your life insurance policy, and the welfare of your beneficiaries, may weigh heavily on your mind if you are suffering from a terminal illness. As it happens, it could be used as a value resource and not just as income for your survivors’ to meet their short and long-term needs. You may be able to get a portion of the death benefit proceeds from your policy before you die, using them to fulfill a lifelong dream or even pay expenses if you wish.

While you are terminally ill, you probably won’t be able to purchase any additional insurance coverage: you are an insurable risk to any insurance provider. But if you purchased a guaranteed insurability rider at the time you purchased your life insurance policy, it’s quite possible you can purchase more life insurance without the hassle of supplying proof you are medically insurable. This isn’t possible in every situation, though, as the rider is optional for the life insurance policy. Your insurance policy may even have an accelerated death benefit rider, making you eligible to receive a portion of the face value of the policy before you pass on. Typically the payments can be in one large sum or spread out in several installments. The up side of this is you can use the proceeds however you want and it’s tax-free if your life expectancy is less than 2 years. You can also choose not to take the full amount available, leaving some of the benefit payable to your beneficiaries.

If you have a cash value, or permanent, life insurance policy which pays you an annual dividend, you may also be in luck. If you are able to use the dividends to lower your premiums as they gather value then it’s often possible (depending on the individual policy) to switch to an option which uses the dividends to buy fully paid life insurance. In this situation you wouldn’t need to provide proof of insurability, either. A cash value option on your policy is also beneficial since many insurance companies make an option to loan against the value of the policy. The insurance company uses the policy as collateral in the loan, and taking a loan against it will reduce any cash value it had and the death benefit proceeds. But it is an option if finances are already tight.

If your illness has let you remain employed, it’s even possible to purchase credit life insurance. Credit life insurance can be used to pay off the remainder of a big-ticket loan, such as for a house or car, after you die. Check with your employer’s life insurance program, also, since you may be able to purchase additional insurance through them. Unfortunately, the open enrollment for their program may only be annually or during a certain period within the year.

Always remember that the more life insurance you purchase the better off financially your beneficiaries will be. It may seem something of a financial burden now, and your premiums will definitely go up, but always purchase the maximum amount you can afford and is available.
 
Until next time,

Michael Hartmann
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