What is terminal illness cover?
Key takeaways
A terminal illness is an incurable, life-limiting condition expected to result in death, such as advanced cancer, dementia, motor neurone disease (MND), lung disease, neurological diseases (e.g., Parkinson’s), and advanced heart disease
Terminal illness cover is a feature often included in a life insurance policy that pays a tax-free lump sum upon diagnosis of a terminal illness
The payment can be used for any purpose, such as to help cover medical bills and adapt living arrangements – or to provide support for family members
Typically, money is paid out if life expectancy is less than 12 months. However, some policies use different prognosis periods which may be longer
Diagnoses made within the first 18 months after the policy start date may also be excluded from cover, depending on the policy terms
Being diagnosed with a terminal illness can be life-changing. It can also cause financial difficulties, and especially if you're no longer able to work. Terminal illness cover can help cover costs and ease the burden for you and your loved ones during this challenging time.
What is terminal illness cover?
Terminal illness cover is usually a feature often included in of life insurance that pays out a tax-free lump sum if you are diagnosed with an incurable, life-limiting illness that meets the policy’s definition, such as advanced cancer or heart disease.
It can help cover the cost of:
Medical treatment
Paying off debts
Making mortgage or rent payments
Adapting your home
Paying for carers
To receive an insurance payout, your doctor must confirm that you have a terminal illness and that you have less than 12 months to live.
What qualifies as a terminal illness?
A terminal illness an illness or condition cannot be cured. It is one which has progressed to the final stage and is likely to lead to the person’s death.
Examples of terminal illnesses and conditions include:
Advanced cancer
Dementia, including Alzheimer's disease
Motor neurone disease (MND)
Lung disease
Neurological diseases, like Parkinson's
Advanced heart disease
Is terminal illness cover included in my life insurance policy?
Many life insurance providers include terminal illness cover as standard with their policies, providing peace of mind that you and your loved ones will have financial support when it's most needed.
However, eligibility for terminal illness cover depends on the insurer’s underwriting assessment, and can be affected by your individual circumstances, including your health history. In some cases, pre-existing conditions or other health factors may affect the terms of your cover – or whether cover is available.
It is important when you first apply for life insurance to answer all the questions truthfully about your health, lifestyle and medical history. By providing accurate information, you can help insurers assess your application correctly. This can also reduce the risk of issues arising if you need to make a claim in the future.
How do I get proof for a terminal illness policy payout?
Your doctor must provide written confirmation that you have a terminal illness, which you can pass onto your insurance provider.
It's important to check your policy documents to see if there are any additional requirements for proving a terminal illness, such as needing a second medical opinion from a specialist or specific diagnostic tests.
When does life insurance pay out on terminal illness?
Unlike standard life insurance, which pays out when you die, terminal illness cover will pay your lump sum during your lifetime, once you get diagnosed with a terminal illness that meets the policy’s definition. Once the insurer has assessed and approved the claim, the lump sum is paid to you.
Do I get keep my terminal illness payout if I live longer?
Yes, if you receive a payout from a terminal illness through your life insurance policy, you can keep the money even if you live longer than initially expected.
The payout is made upon diagnosis of a terminal illness, not upon death, so you are entitled to use the funds as you wish, regardless of how long you live after the diagnosis.
How much does terminal illness cover cost?
The cost of terminal illness cover depends on several factors, including:
Terminal illness cost factors
Age
Younger people tend to pay lower premiums because they generally considered less likely to develop a terminal illness during the policy term. As you get older, the risk to the insurer increases, often meaning higher premiums.
Health
A clean bill of health can reduce premiums
Lifestyle
Habits such as smoking and excessive alcohol consumption can increase premiums
Occupation
Some jobs are considered higher risk and this may translate into higher premiums
Policy type
Whether you choose individual or joint cover will affect the cost
Cover level
The more cover you want, the more expensive it will be
📣 Did you know? Life insurance policies on MoneySuperMarket are available for basic cover. This is based on a single non smoker policyholder aged under 30, with £100,000 of cover over a 10 year term with a decreasing term.
What's the difference between terminal illness and critical illness cover?
There are some key differences between terminal illness and critical illness cover, including:
Critical Illness Cover | Terminal Illness Cover | |
|---|---|---|
Purpose | Pays out a lump sum if you are diagnosed with a serious illness listed in the policy | Pays out early if you are diagnosed with a terminal illness and have a life expectancy of 12 months or less |
Cover type | Covers specific critical illnesses like cancer, heart attack, stroke, and more | Covers any illness deemed terminal by a medical professional |
Payout condition | You must survive a set period after diagnosis (e.g., 14 days) | You must be expected to live less than 12 months |
Policy type | Purchased as a standalone policy or as part of life insurance | Typically included as part of a life insurance policy at no extra cost |
Premium cost | Higher premiums due to wider coverage | Usually no extra cost, it's part of life insurance |
Payout | Pays a lump sum based on the level of cover selected | Pays out the life insurance amount early (full policy value) |
Policy end date | The policy remains active as long as premiums are paid or until the term ends | Only applicable if you have an active life insurance policy |
Are there any exclusions for terminal illness cover?
Yes, there may be exclusions for terminal illness and your insurer might not pay out if:
Your diagnosis is made within the first 18 months of the policy, where this is excluded under the policy terms
You're expected to survive for longer than the period stated in the policy, which is typically 12 months (though it could be longer)
You didn't inform them you already had an illness
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Author
Esther Shaw
Money expert
Esther Shaw is an award-winning consumer, financial and property journalist with more than two decades of experience. As a freelance writer, she regularly contributes to a range of national titles...
Reviewer
Beth Leslie
Senior Insurance Content Editor
Beth is an experienced writer and editor who specialises in financial and economic content. She is currently the Senior Insurance Content Editor for MoneySuperMarket. Beth is passionate about making...
