Can Someone Get Life Insurance If They Are Dying or Terminally Ill?
Hopefully, you’ve prepared for the worst. Long-term financial planning often includes purchasing life insurance.
Unfortunately, purchasing life insurance doesn’t always happen. Sometimes it gets buried on a lengthy to-do list. Other times people decide it isn’t a good fit for them.
Those that don’t have life insurance might have legitimate reasons for not getting it. People that find out they’re dying from a terminal illness might regret making that decision.
When you’re dying, getting life insurance might be something that crosses your mind. This is especially true if you don’t have any coverage.
Sadly, it’s going to be tough to buy life insurance if you don’t already have it.
The reality is:
Your terminal illness diagnosis will prevent most insurers from issuing most types of life insurance.
Fortunately, it is usually possible to get life insurance when you’re dying. It may not work exactly how you would hope.
Here’s what you need to know.
What Are Your Options For Getting Life Insurance When Dying?
Getting life insurance when you’re dying may seem impossible. It typically isn’t.
The key is knowing what type of life insurance plans to look for.
Your options are limited, though.
Term life insurance is not an option
Term life insurance is normally the best fit for most people’s financial plans. It’s relatively inexpensive if you buy it when you’re young and healthy.
You can purchase a significant death benefit, too. It isn’t uncommon to get policies in excess of $1,000,000 for an affordable premium.
Term life insurance generally only works when you’re healthy and younger.
In order to issue a term life insurance policy, the insurance company must assess its risk.
If you’re at high risk for death, you’ll almost always get rejected. This includes having a terminal illness.
Life insurance companies usually make you answer long health history questionnaires before issuing a term life insurance policy.
Many make you get a medical exam that includes doing blood work.
The life insurance companies are looking for any potential risks that could result in your untimely death. If you have a terminal illness, it will likely be found.
Even if it isn’t, you don’t want to lie when applying for life insurance. If an insurance company finds out you fraudulently hid information about a terminal illness, they won’t issue the death benefit.
Thankfully, there is another option a life insurance company may offer.
Consider guaranteed issue life insurance
Guaranteed issue life insurance is a type of permanent life insurance. It stays in effect for your whole life. It doesn’t expire as term life insurance does.
As the name suggests, it’s virtually guaranteed to be issued regardless of your circumstances. You could have just had a heart attack and you’re still likely able to get a policy.
This type of life insurance is costly compared to term life insurance policies of a similar amount. That’s because virtually anyone in any health condition can get a policy.
The insurer won’t ask you any questions or make you take a health exam. Instead, you simply apply for a policy and pay the premiums.
The ability for anyone to get a policy puts the insurer at a much higher risk. If you’re healthy, you’ll almost always opt for a cheaper type of life insurance, instead.
Insurers know this. That’s why they price guaranteed issue life insurance accordingly.
To offset this higher risk, insurers charge more money and limit the death benefits for these policies.
The death benefit of guaranteed issue life insurance policies is often meager. It commonly maxes out at $25,000.
Higher amounts, such as $50,000, may occasionally be found if you can afford to pay the premiums.
Insurers also include language that you need to be wary of. These policies typically won’t pay the full death benefit immediately.
You have to outlive a waiting period to get the full death benefit. Normally, this period is two years. It could be longer or shorter depending on your policy.
During this period, you only receive your premiums paid plus interest if you die. Once the waiting period is over, you can receive the full death benefit.
This lowers the insurer’s risk of someone paying a couple of months of premiums and then receiving a large payout.
If your doctor thinks you’ll die in the next six months, these policies won’t help your family much, if at all.
Essentially, the waiting period may make this type of insurance not worth the cost for those that have a dire diagnosis.
Pros and Cons
Guaranteed issue life insurance does offer your family some benefits.
- Most people can get guaranteed issue life insurance.
- Your family may get money to pay for your final expenses.
- No medical exam is required.
- There is no lengthy health questionnaire to fill out.
Unfortunately, the cons often outweigh the pros.
- Low death benefit amounts are offered compared to other life insurance options.
- Premiums can be high.
- A full death benefit won’t be paid until you pass the waiting period.
- You may only receive your premiums paid plus interest if you die during the waiting period in most cases.
Final Expenses or Burial Life Insurance
You’ve probably received mail or seen TV commercials about final expenses or burial life insurance.
This type of life insurance is almost always the same as guaranteed issue life insurance.
The only difference is how the coverage is marketed.
The unfortunate part of this marketing means you only have one option to get life insurance if you’re terminally ill. That’s guaranteed issue life insurance.
Things to Keep in Mind
As with most types of insurance services, there are some general rules about life insurance.
First, read your policy to understand exactly how it works. In some cases, your policy may not pay the death benefit.
For instance, if a person commits suicide within a specific time frame after getting a policy, there may not be a payout.
As mentioned above, you may not receive the full payout during the first couple of years the policy is in place, either.
Need Life Insurance Money Now? Existing Coverage May Pay Out Early
Some people that are dying need to get the life insurance death benefit money paid out before their death to pay for treatment.
This may be possible on a policy you already have in some instances.
For this to work, you need one of a few potential riders on your policy.
If you have a terminal illness or accelerated death benefit rider on your existing contract, you may be able to take some of the money before you die.
A doctor must diagnose your terminal illness and state you have a certain number of months or years left to live.
Read your policy to see the particular requirements. It should also list information about filing a claim. You may have to fill out a claims form.
The life insurance payout, the amount your beneficiary receives, will be reduced by the amount you take out early.
Other Ways to Financially Help Your Family
Guaranteed issue life insurance may be your only life insurance option after being diagnosed with a terminal illness.
It isn’t the only way you can financially help your family, though.
Managing a terminal illness can be overwhelming and tiring. Even so, you should make sure you have everything in order to help your family moving forward.
You’ll want to make sure you have a proper estate plan in place. Depending on your needs, a will, trust or other estate documents may need to be completed.
Choose a good estate-planning attorney to make sure it is done the right way.
Make sure you start gathering important information about managing your finances, too.
If you usually take care of the household’s money, your spouse needs to learn how to handle the finances.
This includes making sure they have access to accounts with their own usernames and passwords or a list of yours.
Your life insurance beneficiaries should have information about any life insurance policies you may hold, as well.
The last thing they’ll want to do after you pass away is dig around to find them among a massive pile of paperwork.
Ask a Professional About Your Options
It often is possible for those that are dying to get life insurance.
You should be aware of all of your possibilities and the implications before you buy a policy. This way, you can make an informed decision.
You can ask a life insurance agent what your options are, but the results may be influenced by the commissions they receive.
Instead, consider talking to a fee-only fiduciary financial advisor. These individuals get paid by you, rather than by commissions.
They can give you an objective view of your options. Then, they can make recommendations based on your specific situation.