September 17, 2020

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What is terminal illness cover? – a guide by Future Proof

Most life insurance policies include terminal illness cover.

A policy which includes terminal illness benefit will pay out the sum assured if the policyholder is diagnosed with a ’terminal illness’. More specifically, they have been told by a Doctor or Consultant that they have a life expectancy of fewer than 12 months.

This means that if I were to take out a life policy, it would pay out the sum assured if I were to pass away within the term of the policy, or if told by my GP and/or a consultant that I will pass away within the next 12 months.

However, the devil is always in the detail, and one of our roles as expert advisers is to be able to differentiate between one Insurer’s policy and another’s.

We have access to at least 10 major insurance companies and have just completed a study on the terms and conditions of each of their terminal illness policies.

Beware of the small print

Most life insurance policies which were arranged before 2013, will not pay out if a terminal illness diagnosis is made within the last 12 months of a policy, and in some cases, within last 18 months of the policy.

There are still 3 major Insurers who will not pay out if the terminal illness diagnosis is made during the last 12 months of a policy. The good news is that the majority will pay out if the diagnosis is made at any stage during the policy (even if this was one week before the end of the policy term).

How could this affect me?

So what does this mean in reality? The older we get, the nearer we get to the end of the term of a life insurance policy. It is, therefore, more likely we are to be given this type of news by our GP.

Therefore if the policyholder has a life policy that excludes paying out terminal illness benefit in the last 12 or 18 months, it is more likely they will not receive the benefit which they believe they are entitled to.

This could lead to an unsuccessful claim, at a time when the policyholder is gravely ill and is expecting to receive a lump sum. More than disappointing given they have potentially been paying premiums to the insurance company for many years.

They should have been told about the terms and conditions when they arranged their policy and the exclusion would have been set out in the insurer’s Key Features brochure and in their policy documents. However, this may have been many years ago, and the memory fades, especially when it comes to the small print.

What could you do about this?

Firstly, check your policy documents to understand the terms and conditions for your policy. If you are unclear, it may well be worth giving us a call to assist you. We are specialists and will be able to check your documentation for you if you wish, and explain the terminal illness terms and conditions of your policy.

If you would like us to review your cover, or help you consider other options we would be happy to help.  Alternatively, do contact your insurer and ask the question about terminal illness cover, and in particular whether you are covered until the end of the term of your policy.  It may seem like a small point, but if you find yourself in the unfortunate situation of discovering you are not covered, it will be a huge point for you and your family.

Not all life insurance policies are the same, and it’s not just about the cost of the cover. We frequently find that the policies offered by the two insurers who do offer terminal illness cover to the end of their policies are as competitive as those insurers who do not. Either way, a good adviser will explain the differences between the covers as well as the cost, and then at least you will be fully aware of the contract you are entering into.

Next steps

Whilst you are welcome to get a quote online, we would recommend you speak to one of our advisers.

Any quote that your adviser provides you with will take into account your circumstances and medical history, as well as your budget!

An online quote is just that – a quote – it isn’t a definite offer of cover. What really matters is the premium you are offered, after your application has been assessed.

Call Freephone 0800 644 4468 – Monday to Thursday from 09.00 to 19.00 and on Friday between 09.00 and 17.00.

Please feel free to read our Independent client reviews, or read about the team at Future Proof

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Take a look at our handy guides ‘What Cover is Right for me?’

Do you suffer from a medical condition and concerned you can’t secure Life Insurance?  Please view our ‘Medical Guides’ for further information.

Whilst we will make every endeavour to help someone to arrange insurance, there is no guarantee of success.  All applications are subject to underwriting.

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