In insurance terms, a terminal illness benefit is money paid out to you as a living benefit or as a benefit to your beneficiaries by an insurance provider in the event that you become terminally ill. A life insurance policy with a terminal illness benefit will pay out a benefit at the time that the policyholder becomes terminally ill, rather than after they die.
Being able to claim the insurance benefit allows policyholders who become terminally ill to access money in order to cover healthcare expenses, pass on gifts or for any other purpose. Typically, policyholders must prove a life expectancy of 12 months or less as per medical reports in order to qualify for terminal illness benefits. Terminal insurance benefits are typically paid out as a lump-sum.
A terminal illness benefit normally matches the death benefit (the face value) of the same life insurance policy. In the case of decreasing benefit life insurance, the terminal illness benefit matches the death benefit at the time that the policyholder becomes terminally ill.
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