Life Insurance and the Terminal Illness Benefit

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Get an advance on your life policy

Most Canadian Life Insurance companies offer a Terminal Illness Benefit, which pays out a lump sum payout as an advance on the insured’s life insurance policy if he or she is diagnosed by a physician as having less than one, or sometimes two, years to live.

Terminal illness coverage should not be confused with Critical Illness Insurance, which pays out a lump sum if the insured is diagnosed with a critical illness, such as cancer, stroke, or heart attack. Critical illness is used to help offset the cost of surviving a serious illness, whereas terminal illness is an advance on the insured’s life

The following is a list of how some of the top life insurance companies in Canada treat a living benefit advance:

Empire Life: To qualify, the insured must be terminally ill with death anticipated within 24 months. A signed statement must be received from the attending physician confirming this. The advanced payment will be up to a maximum of $100,000 or 50% of the policy face amount.

Transamerica: For newer policies, the living death benefit is contractual. On older policies, they have a non-contractual, compassionate assistance program. If the client is diagnosed with a terminal illness and has been given less than two years to live, Transamerica will pay half the face amount up to $50,000. This is a loan on the policy at 8% interest, and the loan plus interest is deducted from the death benefit.

Canada Life: An advance of a death benefit can be requested for someone diagnosed as terminally ill. Full medical information must be supplied to substantiate the status of the condition. The maximum would be 50% of the face amount, up to a maximum of $50,000. The advance will be subject to interest.

BMO: An advance of the death benefit of up to 50% of the total insured to a maximum of $100,0000 provided that;

a) The policy is not contestable, (beyond the first 2 policy years). 

b) The policy does not have joint coverage.

c) The insured has a life expectancy of less than one year as confirmed by his/her medical physician.


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  • daniel kahan
    April 3, 2017 at 9:12 am

    For those who need help in applying for a Living Benefit from their own life insurer and don’t have a life agent to assist them either because he has retired or the policy was purchased directly, we at Ontario Life Line are willing to assist , especially if the life insurer doesn’t agree with your doctor that that you are terminally-ill with less than 2 years to live. We encountered such a case in March 2016 and after contacting the CLHIA who then contacted the senior management of the life insurer, they finally agreed to give the policyholder a $100K Living Benefit at annual interest rate of 3.75% PA.
    If the policyholder needs more funds, either then or later we are willing to look at coming in behind the life insurer with an additional loan.