Yes, you can get a payout before death if you have bought the appropriate life insurance policy. You could choose among a few possibilities such as adding a rider to your basic policy or choose a ULIP.

The primary purpose of Life Insurance, as with any insurance, is peace of mind. Life insurance plans are primarily meant to cover the risk of dying early. And so, they act as an income replacement tool. However, one may face several other uncertain and unforeseen risks in life during which even a term insurance plan may not be of much help. Merely buying a life insurance policy such as a term insurance plan or a traditional endowment plan may not cover all risks.

What are the different ways you could receive money from your insurance before death?

There many ways to receive money from a life insurance policy before death and hundreds variations of the standard life insurance contract. It depends on the policy. Let’s go over some common ways to get money from a policy before death.

Riders may be part of the policy allowing you to collect money after a qualifying event without dying. Riders are add-on options (Benefits) that can be added to a basic Life Insurance Policy – to provide additional coverage. Common riders are…

Critical illness Rider: Critical Illness Benefit Rider is a rider which will reduce the financial burden in case the Life Assured is diagnosed as suffering from any of the pre-specified critical illnesses. It can help you with your income and give you a large cover that can take care of medical and day to day expenses.

Terminal illness Rider: Terminal illness will be defined by the insurance policy. An example of a policy’s definition of terminal illness is “a medical condition that, with a reasonable degree of medical certainty, will result in the insured’s death within 12 months or less from the date a doctor signs the statement of proof of terminal illness.” Once you are diagnosed with a terminal illness, you will be eligible for this payout.

Major Surgical Assistance Benefit: This rider provides for financial support in the event of medical emergencies which require pre-specified surgery.

Accident and Accident Disability Benefit Rider (ADDB): Accidents may not always result in death but may leave the policyholder disabled. ADDB provides claim in case of death and also in case of disability due to an accident. Insurers usually have a cap of benefit under ADDB which is around 10 lakhs.

Hospital Cash Benefit: This rider offers you a fixed amount benefit for each day of hospitalisation. It also offers a fixed amount benefit if you are admitted in an Intensive Unit Care or a lump sum benefit in case of surgery.

Additional policy options to get a payout before death

Besides the above riders, the other ways you can get a payout are:

If you have a Return of Premium Term Life Policy you would be entitled to return of your premium after the policy term ends, which usually comes in a lumpsum.

Whole life policies build cash value over time that you can borrow from or surrender the policy and receive cash. Also, you may get a maturity benefit if you don’t die before 100 years.

In case of endowment policies, you may receive maturity benefit if you don’t die.

In money back policies, you get a fixed portion of your sum assured at regular intervals

In case of Unit liked plans ULIPs, the partial withdrawal feature makes it a unique and flexible plan. Partial withdrawal only becomes an option after the lock-in period is complete. A withdrawal reduces the size of your corpus and reduces the sum assured. It is suggested to use this feature only when absolutely necessary.

There many ways to receive money from a life insurance policy before death and hundreds of variations of the standard life insurance contract. It’s no surprise people often don’t fully understand what their policy does beyond paying the death benefit.