Business Brief

Most insurance companies structure their life insurance policies to include a terminal illness benefit. What is a terminal illness benefit? The life insured can be diagnosed with a terminal illness such as advanced cancer, dementia (including Alzheimer’s), motor neuron disease, lung disease, neurological diseases like Parkinson’s or advanced heart disease. When the life insured is diagnosed with a terminal illness, most insurance companies offer such a person the option to claim under the terminal illness section of their life insurance policies for them to get their affairs in order before they pass away.

The PPS Professional Life Provider product has the terminal illness product/definition automatically embedded. Therefore, a member does not have to select this benefit at PPS.

When will PPS pay a terminal illness claim? If the life insured is diagnosed with a terminal illness which results in the life insured likely – in the opinion of PPS Insurance – having less than 12 months to live, PPS Insurance will pay 50% of the Life Cover sum assured. The 50% claim payment will accelerate the Life Cover policy.

Example: Peter is a PPS member and has the Professional Life Provider product with a sum assured of R1.2 million. Peter was diagnosed with advanced terminal cancer and the doctor estimated that he would pass away in the next six months. PPS agrees with the doctor and will pay Peter a claim amount of R600 000 (50% of R1.2 million). Because a terminal illness claim accelerates the Life Cover amount, Peter’s Life Cover policy will be reduced to R600 000 and will be paid out when he dies.

PPS made a significant enhancement in September 2021 to this product. When a member (life insured) qualifies for a valid terminal illness claim under their Professional Life Provider policy, PPS will allow that member access to 100% of their Profit-Share Account without applying early access charges (PPS will take care of all taxes before the Profit-Share Account is paid out to the member). On the Terminal Illness claim form, the member can select the option to access the Profit-Share Account. The funds in the Profit-Share Account will be paid into the member’s bank account and the member will be able to use that money as they see fit, or the member can instruct PPS to vest the money with PPS Investments. With this enhancement, PPS believes that our members will be able to access all the necessary medical care they need and fulfil their dream of living the life that they want to, even under these trying circumstances. When a terminal illness claim is paid out as a lump sum, the life insured will not pay any tax on the lump-sum benefit because all tax obligations have already been adhered to by PPS.

However, it is imperative not to confuse terminal illness with a critical illness policy (also known as a Severe Illness or Dread Disease policy). A PPS Critical Illness policy will pay a lump-sum benefit if the life insured suffers from any of the listed dread disease, listed trauma or physical impairment events (can be a standalone or an accelerated benefit at PPS). A life expectancy time frame is not required for a Critical Illness claim to be paid out. A terminal illness can only be claimed from the Life Cover policy. It is not a standalone policy at PPS.

Another thing to take note of is that if the Professional Life Provider policy was ceded to a third party, the terminal illness claim amount will be paid to the third party and not to the life insured. The same will apply when the life insured is claiming from the PPS Business Life Provider policy. The proceeds will be paid to the policyholder of the Business Life Provider policy.

It is important for the life insured to read their policy certificate and ensure what the requirements are when they want to claim for a terminal illness. All aspects must be considered (beneficiaries, taxes and requirements) before a terminal illness claim is submitted.

By: Monique Drotsky, Technical Marketing Specialist

PPS is a licensed insurer conducting life insurance business, a licensed controlling company and an authorised FSP.