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What is terminal illness insurance?

LifeSearch author Katie Crook-Davies
3 min read

by Katie Crook-Davies, Protection Writer

See author bio

Katie works with insurers and distributors to make protection propositions more accessible, pricing more transparent and marketing messages more simple.See author bio

Guide last reviewed 10 Oct 2023

‘Terminal illness’ is a scary phrase. None of us like to think about falling ill, let alone falling ill with a fatal condition. But it happens, and when it does it causes huge concerns about a family’s future. Terminal illness insurance is a product that can take away some of the financial worries, and provide peace of mind to you and your family. Here we explain the product and how it works.


What is terminal illness insurance?

Nowadays, terminal illness insurance is built into most life insurance policies as standard. A terminal illness is typically defined as some condition that is fatal and expected to lead to death within twelve months. If you receive this diagnosis, the insurer will pay your full life insurance benefit at that point, not when you die.

Being diagnosed with a terminal illness can be unimaginably scary, causing emotional and potentially financial stress for you and your loved ones. Having access to this insurance money can help to relieve some of the worries and provide the freedom to live your life as you want. Depending on the illness you’re facing, you may need to adapt your home to make your life more comfortable, again this is where insurance money can come in handy.

What are examples of terminal illnesses?

A terminal illness is any illness that is considered fatal, cannot be cured and will lead to death within a certain period of time. These could be illnesses like advanced cancer, advanced heart disease, dementia, Parkinson’s and lung disease. In reality, some people may live for years with one of these conditions, but in order to qualify for a terminal illness insurance payout, your doctor must be able to confirm that death will occur within twelve months.

There are two things to be aware of:

  • If you fall ill but are expected to live for many years with the condition, you won't receive your insurance money for terminal illness, but may still go on to receive a payout when you die, as long as this occurs during the term of cover.
  • If you develop a terminal illness and receive your insurance money, but then go on to live beyond twelve months, you won't be required to pay the money back to the insurer.

Is terminal illness insurance the same as critical illness insurance?

Terminal illness insurance and critical illness insurance are quite different products, here’s how:

  • Terminal illness insurance is often built into life insurance as standard. Critical illness insurance can be added to life insurance or bought separately, depending on what you need.
  • Terminal illness insurance only pays out for fatal illnesses that will lead to death within twelve months. Critical illness insurance will pay out for any condition covered by the policy. Some policies cover around 50 different conditions, including cancer, heart attack, stroke, organ transplant, blindness and deafness, which don’t have to lead to death.
  • Terminal illness insurance will pay the full cover amount once, and you won’t receive anything further when you die. Critical illness insurance may allow you to make multiple claims on your policy. Some policies pay smaller amounts, say 25% or 50% of the full cover amount, for less severe illnesses, in which case you may be able to claim again if you develop a different condition, or your initial illness gets worse.

What is the cost of terminal illness insurance?

The price of your terminal illness insurance will be built into the overall price of your life insurance because the two products are packaged together.

The cost of your life insurance will depend on a number of things, including:

  • Your age
  • Your health
  • Whether you smoke
  • How long the policy lasts, and;
  • How much cover you want 

Critical illness insurance is more expensive than life insurance, even when it includes terminal illness insurance, and this is simply because you’re much more likely to make a claim on a critical illness insurance policy.

Many people who buy life insurance with terminal illness insurance find it very affordable, and policies can be purchased for less than £10 per month [1] (dependent on the amount and length of cover you require, your age and your medical history).



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LifeSearch author Katie Crook-Davies
Katie Crook-Davies Protection Writer
Katie is an independent insurance consultant who is passionate about protection and wants to share that passion with others through engaging marketing content. She hopes that one day people will get as excited about protecting themselves and their loved ones, as she does!
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