What is Early Payout on Terminal Illness and It’s Benefits? – A Complete Guide


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A life insurance policy secures a family monetarily if there is untimely demise of the policyholder during the policy term. If diagnosed with a terminal illness, a policyholder of a life insurance policy can claim the benefits. Depending on the policy terms and conditions, the insurer might comply with your claim.   

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What is terminal disease benefit?

Terminal illnesses are the ones which are incurable in nature. So, terminally ill means the person is suffering from an illness or condition which is terminal and cannot be cured.

Unfortunately, such illnesses are increasing these days, especially in urban areas resulting in reduced expectancy of life. Heart and lung diseases, advanced cancer, dementia, Parkinson’s etc., are some diseases included in the terminal diseases list. Hence, it is important to have a terminal illness benefit with your life insurance policy. This will help you with financial security in case a terminal illness is diagnosed.

Life insurance with terminal illness benefit means that the policy allows the family of the policyholder a sum assured as death benefit along with additional bonus. Further, some insurance companies offer a 25% sum assured to the policyholder if the life expectancy of the insured is stated to be below 12 months because of the diagnosis of the terminal illness. In this case, if an advanced amount is paid as early payout, the death benefit may be lowered accordingly by the insurer.

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Early Payout on Terminal Illness Insurance

Payout offered in case of terminal illness is early payout. Here, the insurance company pays terminal illness insurance as an early payout what the company would have generally paid in the event of a policyholder’s death. This is because the terminal disease makes the death of the insured almost certain during the policy term.

However, if the policyholder is diagnosed with a terminal illness in the last 12-18 months of their policy tenure, the insurance company might exclude the option of early payout of sum assured. This is because the death of the insured may take place after the policy has ended. However, the insurer will offer death benefits to the family of the policyholder. However, they cannot claim an early payout.

Who is eligible for terminal illness benefit?

Below are some of the people who are eligible for the benefits of terminal illness in term insurance: 

  • People suffering from bypass surgery
  • People with organ failure problem
  • People who are suffering from cancer
  • People with heart ailments
  • Those who are suffering for Alzheimer’s
  • Brain tumour patients etc.

Why is early payout on terminal insurance cover important for you?

An early claim benefit on terminal illness is important because it gives the policyholder an opportunity to use the claim money for medical treatment as well as to spend on the family members for their regular needs.

Further, the high coverage offered under a term insurance plan with a terminal illness cover is better as compared to the inexpensive premium paid by the policyholder. So, it is beneficial to buy a term plan with terminal illness cover.

Can I Claim for Terminal illness benefit if I buy my policy after the diagnosis of Illness?

A policyholder has to furnish information about his/her health along with medical history at the time of applying for life insurance. Some policyholders might have to go through medical check-up which helps in analysis of the overall wellbeing of the policyholder. Hence, in case an individual is already diagnosed with a terminal illness before getting life insurance cover, the insurer might reject his/her application.

Is terminal Illness same as Critical Illness?

Like terminal illness, critical illness is also serious in nature. However, these illnesses are curable by using advanced medical treatments. Further, unlike terminal illnesses the critical illness may not lead to death of the patient.  Here are some differences between terminal and critical illness:


Terminal Illness Insurance 

Critical Illness Insurance 

Sum Insured 

The insured can claim 25% sum assured in case the person is diagnosed with terminal illness

The insured can avail a lump sum amount if diagnosed with critical illness


This insurance protects the family of the insured by giving them a valuable death benefit after the death of the insured

The insured can claim benefit even without hospitalization

Other benefit 

Monetary benefit is offered to the policyholder if the person is diagnosed with terminal illness and the person has a life expectancy of over 12 months

Here, monetary support is offered to the insured only when they suffer from a critical illness

To conclude

The terminal illness benefit is offered with life insurance as a benefit in most cases. Most life insurance policies offer early payout options in case of terminal illness. If a person is diagnosed with a terminal disease with a life expectancy of a year or so remaining, the person can claim such benefit. Hence, opting for a term insurance plan with terminal illness features helps an insured during a medical crisis. Thus, it is better to make an informed decision while buying a term insurance and include the feature of terminal illness benefit with your plan.

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FAQs: What is Early Payout on Terminal Illness and It's Benefits?

What do you mean by early payout on terminal illness in term insurance?

A Terminal Illness Payout means an early death payout. This means that the insurer will pay the sum insured early on as compared to what they would otherwise have paid out in case of policyholder's death.

What will be the benefit paid to the customer under terminal illness?

The policyholder can claim 25% of the sum assured for treatment of terminal illness. They can also avail of a lump sum amount along with a one-time fixed benefit in case of critical illness.

How long does it take to get a critical illness payout?

Generally, the claims can be processed within 30 days after you submit all the necessary documents.

Why is Critical Illness Cover Popular?

Critical illness insurance is popular for several reasons. The best feature is that it provides peace of mind to the insured as you are sure that you and your family will be taken care of financially in case of any serious illness.

How to choose a Critical Illness Plan?

The best way to choose a critical illness insurance plan is to first assess your needs and then compare different life insurance policies to find the one that best suits your needs.

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Jun 27, 2023
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PayBima Team
PayBima is an Indian insurance aggregator on a mission to make insurance simple for people. PayBima is the Digital arm of the already established and trusted Mahindra Insurance Brokers Ltd., a reputed name in the insurance broking industry with 17 years of experience. PayBima promises you the easy-to-access online platform to buy insurance policies, and also extend their unrelented assistance with all your policy related queries and services.

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