Terminal illness benefit

Terminal illness benefit is an optional life insurance extra that gives you financial support if you're diagnosed with a life-threatening illness.

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If you’ve decided that you want to offer your loved ones some financial security when you’re gone, life insurance is something that you may well be looking into. But what would happen if you were living with a terminal illness and unable to support your family because you could no longer work? Terminal illness benefit could be a feature for you so we’ve looked into what it is and how it works.

What is terminal illness benefit?

A life insurance policy will usually pay out a lump sum of money when the policyholder dies. Terminal illness benefit, on the other hand, can pay out the lump sum of money if the policyholder is diagnosed with a terminal illness and given less than one year to live by a consultant or medical officer.

It might often be included in a life insurance policy as a standard policy feature where the policy term lasts longer than two or more years.

How does terminal illness benefit work?

If the policyholder maintains paying the premiums for the policy, a terminal illness benefit claim can be made in which the lump sum of money, due to be paid on the death of the policyholder, is actually paid out when a terminal illness has been diagnosed and the policyholder has 12 months or less to live.

Once a claim has been made and the lump sum has been received, the policy would come to an end and usually, no further premiums are expected to be paid.

In some instances, a claim can be made for terminal illness cover even after the policyholder has died.

What is a terminal illness?

A terminal illness is any illness that cannot be cured or advanced to a stage where it cannot be cured. A consultant or medical officer making the terminal illness diagnosis might also expect the illness to lead to death within 12 months.

Differences between terminal and critical illnesses

Terminal illness and critical illness can both refer to extremely serious medical conditions. The main difference between them is that a consultant will usually expect a terminal illness to bring about the death of an individual within 12 months. A critical illness could be an isolated serious illness, injury or medical episode as defined by an insurer, that an individual is expected to recover from.

Other things to look out for in terminal illness cover

When taking out a life insurance policy, you should be aware that not all insurers will include terminal illness cover as standard. Some may even go as far as actually excluding making a terminal illness cover payout if there is less than 12 months left on the policy term. A payout on this type of policy would only be paid out if the policyholder were to die before the end of the policy term.

If you and your partner have a joint life insurance policy with terminal illness cover included, the insurer may still only make one payout either on the terminal diagnosis of one of the policyholders or in fact their death.

How to find the best terminal illness cover

Terminal illness benefit is included with some life insurance policies but not all policies, so it’s worth doing your research and finding out which insurers include this as standard to see whether these policies also suit your requirements in other areas.

Finding the best life insurance policy will very much depend on your own circumstances as what might work for you and your loved ones might not work for another family.

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