Does Life Insurance Cover Terminal Illness? 
If someone has a terminal illness at the time of applying for life insurance , there are a handful of guaranteed issue policies that will provide that person with coverage . However , this type of policy usually has a minimum age limit of 40 + , is for small face amounts -LRB- usually under $ 25,000 -RRB- and not all states offer them . In addition , this type of policy is graded and will not pay out the full face amount for death due to illness until 2 + years have passed . If someone has life insurance and then is diagnosed with a terminal illness , and if the life insurance application/interview was done truthfully , then the policy will pay for death due to that illness , even if it occurs shortly after the policy was taken out . Some policies even offer a rider that allows the terminally ill person to take part of the death benefit in cash prior to death . 