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Life Insurance for Terminally Ill Patients
Being diagnosed with cancer or a terminal illness changes everything.
If you have a terminal illness and need life insurance, it's not too late—you may still be able to buy coverage. Because even despite a terminal cancer diagnosis (or diagnosis of another terminal illness), you can still buy life insurance in the form of a guaranteed issue policy.
Sometimes called "final expense" or "burial insurance," guaranteed issue policies offer fairly low coverage amounts—up to $25,000—in return for relatively high premium payments. Guaranteed issue policies don't ask medical questions and don't require a medical exam, however, making it possibly one of the only options for life insurance for terminal cancer patients.
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While planning for your family's future, consider creating a will using Fabric. Fabric is an online life insurance company that also offers a free will creation service and more.
Most life insurance policies require a medical exam and access to your medical history. Being terminally ill will disqualify you from fully underwritten permanent life insurance policy and term life insurance policy. However, policies that don't ask health questions and don't require a medical exam are fair game.
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Is there a life insurance policy for terminally ill cancer patients?
There is no specific life insurance policy for terminally ill cancer 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.
Life insurance with a terminal illness rider
Terminal illness riders are not the same thing as life insurance for the terminally ill. This rider, also called an Accelerated Death Benefit, allows you to draw from your death benefit early if you're diagnosed with a terminal illness. If you already have a terminal diagnosis, however, it's probably too late to buy this rider.
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%.
Practically speaking, if a insured cancer patient passes away one year after buying a burial insurance policy, the full death benefit will not be paid. Instead, the insurer will return what was paid into the policy to the beneficiary—plus interest.
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.
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 might.
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 on to live 2 years and 1 month or you go on to live 10 years, you have beaten the odds.
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?
It's worth considering. 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% interest, depending on the insurance company.
If you outlive the graded death benefit even by a single day, then your beneficiaries will get a much bigger death benefit 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.