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Terminal Illness Cover

What is terminal illness cover?

Rachel Ditchburn
Written by  Rachel Ditchburn
10 min read
Updated: 26 Feb 2024

We can’t plan for a terminal illness, but adding terminal illness cover to your life insurance plan will help should the worst happen. Even if you are no longer here, terminal illness cover is a valuable protection to take care of you and your family.

Facing a terminal illness is an incredibly challenging experience, not just emotionally and physically, but also financially. It's a time when individuals and their families must confront the reality of a life-limiting condition and the impact it has on every aspect of life. In this article, we'll explore what terminal illness entails, the conditions classified under this term, and the insurance coverage options available to help ease the financial burden during such a difficult period.

What is a terminal illness?

A terminal illness is an incurable and life-limiting disease or condition that is expected to result in death. It's a term that encompasses a broad spectrum of diseases, where patients may be battling a single condition or facing multiple illnesses simultaneously. An aggressive or advanced stage of cancer is a common example of a terminal illness. However, terminal illnesses can vary widely and may include:

  • Advanced cancer

  • Dementia, including Alzheimer's disease

  • Motor neurone disease (MND)

  • Lung disease

  • Neurological diseases, like Parkinson's

  • Advanced heart disease

These conditions are not only life-altering but also present significant financial challenges due to medical expenses and the need for lifestyle adjustments.

hospital staff in a hospital with a patient in the bed

Terminal illness cover: a financial lifeline

To address the financial strain that comes with terminal illnesses, there is a specific type of insurance known as terminal illness cover that makes part of a life insurance policy. This policy is designed to help with financial implications such as paying medical bills or adapting one's home and life to changing needs. It provides a tax-free lump sum upon the diagnosis of a serious medical condition. The intention is to alleviate the financial pressures associated with the illness, such as ongoing medical costs or modifications to living arrangements.

Typically, terminal illness cover could pay out the full cover amount of your life insurance policy if you are diagnosed with a terminal illness, such as cancer, usually when life expectancy is less than 12 months. Once this benefit is paid, the life insurance policy is considered fulfilled, and no further payout is made upon the insured's death.

Life insurance and terminal illness coverage

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 can be affected by your health history. You will be eligible for terminal illness cover unless you have a related pre-existing condition that is likely to shorten your life. It is therefore important when you first apply for life insurance to answer all the questions truthfully about your lifestyle and health. If you’re open and honest, the chances are that any claim you later make will be easily accepted.

Critical vs. terminal illness: understanding the difference

It's crucial to differentiate between terminal illness cover and critical illness cover. Critical illness cover is an optional add-on for some life insurance policies that gives you extra cover. It pays out for specific critical illnesses listed in the policy, which may not necessarily be life-threatening. In contrast, terminal illness cover is only applicable if the life expectancy at the time of diagnosis is less than 12 months.

The certification process

When it comes to certifying a terminal illness, a doctor or medical officer must provide written confirmation that the patient's life expectancy is indeed reduced. Terminal illness policies may specify an expected survival duration post-diagnosis, which could be up to 18 months. However, no repayment is required if the patient outlives this period, which can sometimes happen.

Potential exclusions and payout conditions

It's important to note that there are certain circumstances when a terminal illness benefit might not pay out. For instance, life insurance policies may have clauses that exclude diagnoses made within the last 18 months of the policy. Additionally, life insurance providers could also refuse to pay out on diagnosis if you are expected to survive for a longer period, for example over 18 months. However, in practice, terminal illness claims are often honoured as the individual is still likely to die well before the policy ends.

Facing a terminal illness is undoubtedly one of the most difficult situations anyone can endure. While the emotional and physical toll can be overwhelming, the financial aspect should not be an added stressor. Understanding terminal illness cover and ensuring you have the right life insurance in place can provide some comfort, knowing that you and your loved ones will have financial support when it's most needed. It's a matter of planning ahead and choosing the coverage that best fits your needs and gives you peace of mind during life's most challenging moments.

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