What Is Terminal Illness Rider? Definition

Why it matters

Many carriers include this rider at no extra premium, though some charge a fee when it is used. The money can pay for care, bills, or family needs. The payout reduces the death benefit left for the beneficiary. Federal tax law treats benefits for a terminally ill person as generally excluded from income if certified as expected to lead to death within 24 months. Time limits and maximum amounts vary by carrier and state.

Source: law.cornell.edu

Related terms

Accelerated Death Benefit Rider: An accelerated death benefit rider lets the insured receive part of the death benefit while alive if diagnosed with a qualifying condition, such as a terminal illness. It is also called a living benefit.
Chronic Illness Rider: A chronic illness rider is an add-on that lets the insured access part of the death benefit early if a licensed health care practitioner certifies a chronic illness, usually the inability to perform daily living activities.
Critical Illness Rider: A critical illness rider pays part of the death benefit early if the insured is diagnosed with a covered condition, such as a heart attack, stroke, or cancer. The list of conditions is set in the rider.
Rider: A rider is an optional add-on to an insurance policy or annuity that changes or adds benefits for an extra cost. It becomes part of the contract once attached.
Death Benefit: A death benefit is the money a life insurance carrier pays to the beneficiary when the insured dies. It is usually paid as a lump sum and is generally income tax free to the beneficiary.

All 241 terms

Why it matters

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