Being diagnosed with a terminal illness changes everything—especially your life choices. Now that you have been diagnosed with a terminal illness, one of the things you will have to figure out is how to best financially protect the ones you love so dearly—and ultimately will leave behind.
Making tough but necessary decisions
The minute your doctor told you that you have a terminal illness, you probably thought about your loved ones. If you are not in a financially sound position or don’t have a huge inheritance to leave them, then it’s time to explore alternatives.
Terminal Illness Life Insurance
Too Late for Life Insurance?
Most life insurance policies require a medical exam and access to your medical history. Being terminally ill will disqualify you from fully underwritten whole life insurance and term life insurance. That being said, it’s not too late for you to purchase a life insurance policy.
Is there a life insurance policy for terminally ill patients?
There is not a life insurance policy specifically for terminally ill patients, but there is a life insurance policy that you can qualify for as a terminally ill patient, called a guaranteed issue life insurance policy.
This type of policy will offer face amounts typically ranging from $1,000 to $25,000. The main purpose of this coverage is to provide final expense and burial insurance. We have put together a list of our favorite burial insurance and final expense companies.
What kind of coverage does guaranteed issue life insurance offer?
Guaranteed issue life insurance is a no-exam, no questions asked life insurance policy. It is not designed specifically for terminally ill patients, but for anyone who has medical problems that may disqualify them from a whole or term life policy (or make either policy have high premiums).
Guaranteed issue policies are cash value whole life insurance policies that come with a 2 or 3 year graded death benefit.
What is a graded death benefit?
A graded death benefit is something that guaranteed issue life insurance policies include to protect life insurance companies from having to pay large sums to people who may not have long to live—and thus who aren’t paying much into their life insurance policy.
A graded death benefit means that for the first two years (three years with some carriers), the policy is only as good as the amount you’ve paid into it, plus interest. The interest rate varies but is usually 8% or 10%.
For example: a 58 year old male applying for $20,000 policy would pay approximately $100 a month for a guaranteed issue life insurance policy with an A rated carrier. The return on a 2 year graded death benefit would look as follows:
|Months lived under policy||Amount of Premium Paid |
|Interest Earned (at 10%)||Total Amount Beneficiaries|
|2 Years||$2,400||N/A||Full Death Benefit of|
What if I outlive the graded death benefit?
When you purchase a guaranteed issue life insurance policy fully knowing you have been given a set amount of time to live, you are hoping for the best. This means you believe that you can prove the doctors wrong—and you will!
You are hoping to live a longer, fuller life than they have given you hope for, but you still know that one day, like all of us, you will pass away. If you are given six months but go onto live 2 years and 1 month or you go on to live 10 years, either way—you have beaten the odds.
And either way, your life insurance beneficiaries will receive the total insurance payout that you’ve signed up for as long as you live past the graded death benefit period.
Should I get a guaranteed issue life insurance policy even though I am terminally ill?
We say, what do you have to lose? If you happen to live less than the graded death benefit period, your beneficiaries will still receive the amount of money you had saved up—and 8 to 10%!
If you outlive the graded death benefit even by a single day, then your beneficiaries will get a much bigger payment from the life insurance company.
You will have made a financial choice that could greatly help your beneficiaries in a great time of need. Remember, they are the ones that will still remain after you’re gone—the ones who will need and appreciate the financial protection that you have provided for them.
If you aren’t sure whether or not to go ahead with a guaranteed issue life insurance policy or not, call us today for a free consultation.
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