Let’s be honest with you. If you have a terminal illness, your insurance options are limited. Most policies require underwriting and a medical exam, which you wouldn’t pass if you have a terminal illness. Fortunately, you have two options for life insurance for a terminal illness. You can choose between guaranteed life insurance and final expense life insurance.
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How to get Life Insurance if You’re Terminally Ill?
If you’ve received a terminal illness, you can’t get the typical term or whole life insurance. They both have medical exams and strict underwriting guidelines. Your terminal illness would exclude you from coverage.
As mentioned earlier, you have two options:
- Guaranteed life insurance
- Final expense life insurance
Neither plan requires a medical exam. You complete an application and receive instant coverage.
You complete the paperwork, and you have coverage right away. But there is a catch.
Most guaranteed issue plans have a waiting period, some as long as two years. That means if you die within the first two years, your beneficiaries won’t receive full payment. Instead, they’ll receive the premiums you paid plus a percentage, usually 10%, but each insurance company differs.
If your prognosis is short, as is the case with many people with a cancer diagnosis, you may need a policy without a waiting period. This is hard to find when looking for life insurance for terminal cancer patients.
How to Get Life Insurance for Terminally Ill Parents
If your parent receives a terminal illness diagnosis and you find out they don’t have insurance and/or the funds to cover their final expenses, you may want to open a policy on them too.
Just like if you were to get the terminal illness diagnosis, you can buy life insurance for terminally ill parents under one condition. They MUST give their approval. In other words, you can’t take out a policy on your parents without them signing the documentation.
You can buy and pay for the policy, but your parents must acknowledge that they are okay with it.
It’s also important to note that only two parties should be named on the policy to avoid taxation. For example, if you take out the policy for your parents, you are the policy owner, and they are the insured. To avoid getting taxed on the proceeds, you should also be the beneficiary.
How it Works
Buying a guaranteed issue or final expense life insurance policy is easy. You find the insurance company you want to use – we recommend shopping around and getting a few quotes.
Once you settle on a company, you complete the application either online or over the phone. You can apply for modest insurance coverage amounts, usually no more than $50,000, but the amounts vary by the insurance company and your qualifying factors (age, location, etc.).
You don’t have to answer questions or undergo a medical exam. If approved (everyone is), you receive your policy documents instantly.
Types of Plans Available
You have two options when applying for life insurance with a terminal illness.
Guaranteed Life Insurance
Guaranteed life insurance is a modest life insurance product that provides enough funds for your final expenses and a little extra. Most companies offer it to applicants ages 50 to 85 and up to $50,000 in coverage.
No medical exam
Grows a cash value
Usually has a waiting period of 2 years
Limited coverage amount
Only available between ages 50 to 85
Premiums vary based on various factors such as age and location, but on average, guaranteed life insurance premiums cost between $95 – $120 a month for $125,000 in coverage.
Burial Insurance for the Terminally Ill
Burial insurance for the terminally ill is the same idea, except its primary purpose is to help your loved ones pay for your funeral and burial. It’s offered to applicants ages 45 – 80 and in coverage amounts up to $25,000 (sometimes even less).
This is important:
The main difference is the waiting period. Many final expense policies have a graded benefits period. Rather than waiting a full two years for coverage, you receive incremental increases in coverage. The most common is 30% – 40% payout if you die between months 1 – 12 and 70% – 80% if you die between months 13 – 24. After 24 months, your beneficiaries would receive 100% of the plan amount.
No medical exam
Grows a cash value
Minimal coverage amount
Only available between ages 50 to 85
May not be enough to cover the full cost of a funeral
Final expense insurance premiums also vary by age and location, but on average, for $10,000 in coverage, you’ll pay between $25 – $90 a month.
What is terminal illness life insurance?
Terminal illness life insurance is another name for guaranteed life insurance and/or final expense life insurance. The type you purchase depends on your needs. Do you need coverage for more than your final expenses, or do you just want to make sure you cover the funeral and burial expenses?
Final expense insurance is suitable if you want to cover your burial and funeral and nothing else. If you need ‘a little more’ coverage, a guaranteed life insurance policy is best. It has higher coverage amounts, but of course, that comes with higher premiums.
Should you get life insurance if you’re terminally ill?
You aren’t required to get life insurance if you’re terminally ill, but if you don’t have anything else set up to cover your end of life expenses, it may be a good idea.
Assess your financial situation. Do you have money in your retirement funds, bank account, or another life insurance policy? If not, securing a guaranteed life insurance policy and/or final expense insurance policy can make it easier on your loved ones.
Can you get life insurance on someone who is sick or dying?
You may be able to secure life insurance on someone who is sick or dying, but ONLY if you have their approval to do so. They must be of sound mind and agree to the policy, signing the paperwork themselves. You cannot take a policy out on someone who can’t make decisions for themselves.
Can you get burial insurance if you have cancer?
You can get burial insurance or final expense insurance if you have cancer. It must be a guaranteed life insurance policy, though, not a simplified issue policy. Life insurance for terminally ill cancer patients cannot have any underwriting or medical questions.
While a simplified issue policy doesn’t require a medical exam, you will answer medical questions, which could include questions about having a terminal illness, such as cancer.
Can you get life insurance on your deathbed?
There aren’t any rules stating you can or cannot get life insurance on your deathbed. However, you must be of sound mind to sign the paperwork, even if someone else is obtaining the policy for you.
Is guaranteed issue life insurance worth it?
The answer to this question depends on your situation. If you have other life insurance policies and/or money saved elsewhere, guaranteed issue life insurance isn’t worth it. But, if you have no other means to pay for your final expenses and/or leave money behind for your beneficiaries, then it’s your only option.
Can life insurance companies refuse to payout?
If you have a guaranteed issue life insurance policy, the insurance company will pay out for most reasons, but they may have a few exclusions. The two most popular exclusions are if you die by suicide or your death is due to a crime you were involved in.
What happens if I get life insurance today and die tomorrow?
The type of life insurance you get determines what would happen in this situation. Read the fine print. Do you have a waiting period? If you do and you die tomorrow, your beneficiaries won’t receive a payout. If you have instant coverage (no waiting period), they will receive a full payout.
Should you Buy life Insurance for a Terminal Illness?
Only you know if you need life insurance for a terminal illness. If you didn’t prepare beforehand and find yourself wondering how your loved ones will cover your burial expenses, it’s a good idea.
If you have other money set aside for this purpose, you may not need it. Because you need a guaranteed or final expense life insurance policy, you’ll pay a lot more in premiums than you would for a standard life insurance policy. Weigh your options carefully to determine if a guaranteed life insurance policy or final expense life insurance policy is right for you.