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Terminal illness cover

Life insurance: What is terminal illness cover?

published: 17 September 2020
Read time: 5 minutes

It is usually possible to include cover for terminal illness in your life insurance policy. This guide explains what it is and how you can get it

Terminal illness cover is a type of life insurance policy that pays out upon diagnosis rather than when you die.

Insurers define a terminal illness as a disease with no known cure, or one that has progressed to a point where you can no longer be cured and is expected to lead to death within months rather than years.

Examples of terminal illnesses could be advanced cancer, heart disease or motor neurone disease.

Will my life insurance policy cover me for terminal illness?

Terminal illness is included as standard with most life insurance policies, but if it isn’t, you can probably add it at a small extra cost.

You will be eligible for terminal illness cover unless you have a related pre-existing condition that could shorten your life.

It’s therefore very important when you first apply for life insurance to answer all the questions fully about your lifestyle and health. If you’re open and honest, the chances are that any claim you later make will be accepted.

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Who certifies that I am terminally ill?

A doctor or medical officer will need to confirm it in writing and state that your life expectancy has been shortened.

Terminal illness policies differ for how long you are expected to live after diagnosis, but it could be up to 18 months.

However, if you live longer than expected, you will not have to pay anything back.

Will I be paid out straightaway?

Terminal illness cover is often paid to the individual as soon as possible after they make a claim. The policy will then be closed even if it is a joint life insurance policy.

Alternatively, it might be that only part of the policy is paid if you are diagnosed with a terminal illness, with the rest paid to loved ones after you pass away. You should check the policy details to be sure.

When might terminal illness cover not pay out?

There might be clauses in your life cover which list circumstances under which terminal illness cover may not pay out. Some insurers have a cut-off for terminal illness which means that they won’t pay out for a diagnosis made within the last 18 months of the policy.

This is because it can be hard to predict exactly when someone might die, and you might outlive the term of the policy. Time limits such as these are not a factor where you have a whole-of-life policy.

Life insurance companies could also refuse to pay out on diagnosis if you are expected to survive for a longer period, for example over 18 months. In practice, however, terminal illness claims are often honoured because the individual is still likely to die well before the policy ends.

Are terminal illness and critical illness cover the same?

No. Terminal illness is cover that will only pay out if you have been told you’re likely to die in the near future.

Critical illness cover includes serious health conditions, so you might still be given a pay-out even if your diagnosis is not life-threatening.

Is terminal illness covered by my employer?

Terminal illness cover may be included by your employer as part of your employment benefits. In fact, employers often include benefits that will pay out for death-in-service, critical illness and terminal illness.

It’s worth noting that these policies are likely to only be in place as long as you are an employee of the company.

If you leave or change job, you might want to consider making alternative arrangements.

Compare terminal illness cover

To find a cheaper deal on terminal illness cover, you should compare life insurance quotes from different providers using MoneySuperMarket.

The cost of premiums can vary significantly and comparing different offers from a variety of providers means you’re more likely to find the right policy for you at a great price.

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