Are terminal illness cover and critical illness cover the same?

Insurance terms aren’t always clear which can lead to confusion and misunderstanding. One example is terminal illness and critical illness insurance which sounds like they should be the same, when in fact, they’re very different – here’s how.

What’s the difference between a terminal illness and critical illness?

It might not seem like there’s much difference between the two but from an insurance perspective, there’s a clear distinction.

A critical illness is a serious but survivable condition, albeit with long-term care, medication or therapy. For example, a heart attack, stroke, some forms of cancer, or neurological conditions such as Parkinson’s.

A terminal illness is one where you’re not expected to recover, and your doctor believes it will lead to death within 12-months.

How does critical illness cover work?

If you’re diagnosed with a critical illness covered by your policy, your insurer will pay out a cash lump sum.

Bear in mind that what’s classed as a critical illness will vary by insurer but your policy should clearly set out what conditions are covered. If you’re diagnosed with an illness that isn’t listed in your policy, you won’t receive any money.

How do I buy critical illness cover?

You can pay a little extra to add critical illness cover to your life insurance policy. Or you can buy it as a standalone policy – either with the same insurer that provides your life cover or from another provider.

How much critical illness cover do I need?

A critical illness could limit your ability to work and in some cases, it could leave you unable to work at all. Based on that, the level of cover you choose should be enough to cover your regular expenses or pay off large debts like your mortgage. Considerations could include:

  • Childcare costs
  • Household bills
  • Future expenses such as university fees

What is terminal illness insurance?

Terminal illness cover is typically included in your life insurance policy as a standard feature – there is no extra cost for it.

If you’re diagnosed with a terminal illness and are not expected to live more than 12-months, speak to your provider and they’ll take you through the claims process. It’s normal for them to seek confirmation from your consultant or doctor but after that, you’ll receive the cash payout.

It’s important to know that if you make a successful claim and your insurer pays out for terminal illness, your life insurance policy will end. There will be no further payout when you pass away.

Do I need to give money back if I live longer than 12-months?

No , you won’t be expected to pay back any money if you survive the original prognosis and live for more than 12-months.

Will life insurance still pay out after a critical illness claim?

As a general rule, life insurance only pays out once. So, if your life insurance plan includes critical illness cover and you make a successful claim, your policy will end.

However, if you and your partner have joint life insurance and critical illness cover, your partner would usually still be covered after you made a claim.

With this in mind, it’s vital to read the conditions set out in your policy so that you know exactly what happens after a claim has been made.

Do I need critical illness cover?

Critical illness insurance can provide some financial security if you become ill and cannot work. While not everyone will need this support, it might be worth considering if:

  • You have dependents that rely on your income
  • You have no savings or not enough to live on
  • You want to supplement any sickness benefits you receive from your employer or the state

Should I buy standalone critical illness insurance?

A standalone policy offers an extra layer of protection in addition to life insurance. If you choose to buy critical illness cover separately from your life cover, you’ll be able to make a claim when you become ill. Then, when you pass away, your beneficiaries will be able to claim on your life insurance policy.

If you decide to buy critical illness cover as part of your life insurance policy, remember that policies typically pay out just once. If you make a successful claim for critical illness, your policy will pay out and then end. There will not be a ‘second’ payout when you pass away (unless you bought another life insurance policy).

Are there any alternatives to critical illness cover?

Yes, income protection is another type of insurance product that could be an alternative to critical illness cover.

The main difference is that income protection provides you with a monthly payment instead of a lump sum. The principles are essentially the same and income protection will pay out if you become ill or are injured and cannot work.

Income protection isn’t designed to cover your usual monthly salary in full – it’s usually around 60% to 70%. This is because the payment is tax free.

You can choose between:

Short-term income protection

You’ll receive a monthly payment for a fixed length of time, usually this is up to two years, but you can find policies with a longer term.

Long-term income protection

These policies will provide a monthly payment until you go back to work, retire or pass away.

Life insurance for peace of mind

Life insurance can help cushion loved ones from financial insecurity, but that doesn’t mean you should spend more than you need. In our comprehensive guide to life insurance, we pick out our top ten providers so you can be confident about finding the right cover for your needs.


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