A guide to terminal illness cover

Terminal illness cover is included on many life insurance policies. If you’ve got this cover, your policy will pay out when you're diagnosed with a terminal illness, subject to certain terms and conditions, rather than when you die.

Amy Smith
Amy Smith
Updated 13 May 2020  | 4 min read

What is terminal illness cover?

Terminal illness cover can pay out the full amount on your life insurance policy if you are diagnosed with a terminal illness while your policy is in place. If you’ve got this cover, your policy will pay out on diagnosis rather than when you die.

A doctor will need to confirm you’re terminally ill, and that your life expectancy is between 12 and 18 months. If you live longer, you won’t be expected to pay anything back.

Who can have terminal illness cover?

Most people will be able to get terminal illness cover, unless you have a pre-existing condition that could prove terminal.

Once you have terminal illness cover on your policy, you would be considered for a payout only when a doctor or specialist confirms the diagnosis.

Is terminal illness covered by other insurance, such as cover provided by my employer?

If you're in employment, part of your benefits package may include death in service, terminal illness cover and/or critical illness cover. Check with your employer or other insurance providers to make sure.

If you leave or lose your job you won’t have that cover anymore and - depending on your age and the state of your health - it may be difficult or expensive to arrange insurance yourself.

What is a terminal illness?

A terminal illness is a disease that has no known cure or has progressed to a point where it cannot be cured, where the expected outcome is death.

Critical illness cover vs terminal illness cover

Critical illness cover and terminal illness cover aren’t the same thing. It’s possible you could recover from a critical illness, and unlike a terminal illness you might not be expected to die.

Because of that, the two cover types cover different outcomes.

Life insurance policies usually include terminal illness cover as standard. You’ll get paid out the sum assured if your doctor has confirmed you have a terminal illness and are likely to die within 12 months.

Critical illness, however, is designed to cover serious health conditions from which you might recover.

An alternative to critical illness cover you might want to consider is income protection insurance, which can offer cover if you're too ill to work.

Terminal illness cover: things to look out for

  1. It's rare for a policy to pay out on diagnosis if there's less than 12 months left of your policy's term

  2. If a terminal illness payment is made, you won't get a further payment after the policyholder's death. With some policies, the payment might be made in part, and the rest paid on death

  3. Terminal illness cover isn't often available on renewable or convertible term policies

  4. If you have a joint life policy, there’s usually only one payout. Your policy would pay out for the first person, and nothing for the second if anything happens

When might terminal illness cover not pay out?

Usually not within the first 18 months of a policy, or in some cases, if the person is expected to live more than 12 months.

What if a policyholder lives longer than 12 months after the payout?

If a terminal illness payment is agreed and made, but you survive longer than 12 months, you don’t have to pay the money back to the insurer.

The life insurance policy will probably have been terminated, though, meaning there'll be no future cover for you or your dependants.

If you wanted to take out a new life insurance policy, be aware that you’ll need to declare any pre-existing conditions. They could be excluded from your cover, or your premiums could be costly.

Do all life insurance policies include a terminal illness benefit?

Most do – almost all life insurance companies offer a free add-on of terminal illness benefit. If it’s not already included or offered for free, you may be able to add it as an optional extra, where you pay a little extra to add it.

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