What is terminal illness cover?
What you need to know
- Terminal illness cover can only be claimed with a valid Life Insurance policy, not if the policy is no longer in place.
- It provides an early pay-out from a successful claim, not an additional pay-out. This means the policy will cease.
- Doesn’t pay-out in the last 12 months of your policy.
- If you have written your Life Insurance policy in Trust then a terminal illness cover pay out would still be paid directly to you.
- If a pay-out is received early then it will no longer be in Trust, meaning it could be subject to inheritance tax.
The difference between terminal and critical illness
Terminal illness and critical illness are often misunderstood to be the same. There are some distinct differences between the two. Take a look at the table below.
|Terminal illness||Critical illness|
|Pay-out upon diagnosis of under 12 months to live||Claims can be made upon diagnosis of a pre-defined critical illness|
|Automatically included in every policy||Needs to be added to your policy in the application|
|Acts as an early pay-out from your Life Insurance||Acts as a separate pay-out, so you could claim for critical illness and still claim for Life Insurance|
|Cannot claim pay-out in the final 12 months of the policy||Pay-out can be claimed any time within the policy term|