Terminal illness insurance; how insurance may help if you’re seriously ill

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Terminal illness cover is a benefit that’s included in many life insurance and critical illness insurance.  It’s something you hope you’ll never have to claim on, but if you are diagnosed with a terminal illness it could pay out a lump sum.

What is terminal illness insurance?
Terminal illness insurance pays out a lump sum if you are diagnosed with a terminal illness and have less than 12 months to live. It’s not a policy that you can buy as a stand-alone benefit, but it’s often included in life insurance or critical illness policies, at no extra cost.

SAVVY TIP: Although most life insurance policies include terminal illness benefit not all do, so it’s worth checking the small print of your policy.

Life insurance policies

If the terminal illness cover is part of your life insurance, you’re effectively getting an early payout on the policy. In most cases the terminal illness lump sum will be the same as the amount you’d get from the policy if you were to die.

SAVVY TIP: Terminal illness insurance is often not available on the last 12 or 18 months of a life insurance or critical illness insurance policy. It varies from insurer to insurer.

Critical illness policies

Most critical illness policies will pay out a lump sum if you’re diagnosed with a specific illness that’s on a list of around 25 or more illnesses covered by the policy or if you’re totally and permanently disabled. If the policy has terminal illness benefit included it will also pay out a lump sum if you’re diagnosed with a terminal illness and been given 12 months or less to live.

SAVVY TIP: Terminal illness insurance should not be confused with critical illness insurance.

What evidence would insurers require?
In order to be eligible for a payout you would have to be diagnosed with a terminal illness and told that you have 12 months or less to live. Insurers would normally ask for:

  • Evidence from a consultant. This would generally have to state that you have no longer than 12 months to live. However, some insurers are stricter than others over the evidence they require.

SAVVY TIP: Even if it’s likely that you’re not going to live for more than 12 months, it may be hard for a consultant to state that this is definitely the case.

  • The opinion of the insurer’s medical expert. Insurers will only pay out on terminal illness cover if their own medical expert believes that you will live for less than 12 months. In this case they would look at evidence from your consultant, test results and your GP.

What to look for
If you’re buying critical illness insurance or life insurance, it’s definitely worth looking at whether or not they include terminal illness insurance in the policy. As most providers do (and you can’t buy it as a standalone policy) you could be missing out on a valuable benefit if you don’t pick the right insurer.

  • Is terminal illness benefit included?
  • What evidence do I have to provide to be eligible for a payout under terminal illness cover?

SAVVY TIP: If you’re buying something like critical illness insurance (with terminal illness cover included) you shouldn’t simply go for the cheapest policy. Examine the terms and conditions carefully or – even better – contact a specialist broker. If you buy through a broker it means there will be someone fighting your corner if you have to make a claim.

Related articles:

Do you need life insurance?

Critical illness insurance; how to find the right policy

Complaining to the Financial Ombudsman Service

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