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Terminal Illness

Terminal Illness

In Canadian life insurance policies, a terminal illness refers to a serious, incurable medical condition diagnosed and certified in writing by the policyholder’s attending physician and at least one independent specialist physician.

The certification must confirm that, based on a reasonable medical certainty, the insured person’s life expectancy is 12 months or less from the date of the diagnosis.

This provision often triggers an accelerated death benefit (also called a terminal illness benefit or advanced payment), allowing the policyholder to receive a tax-free lump-sum payment—typically 50% to 100% of the policy’s death benefit—while still alive.

The funds can be used for medical expenses, home care, travel, or other needs during this period, with the remaining death benefit (if any) payable to beneficiaries upon death.

Definitions may vary slightly by insurer or policy, so reviewing specific policy wording is recommended.

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