Key Differences between Terminal Illness and Critical Illness Cover

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With so many types of insurance policies available nowadays, such a wide choice can often prove to be very confusing to the consumer. It can be difficult to distinguish between the different types of insurance cover available and a clear example of this is terminal illness cover and critical illness cover. Whilst they may sound very similar, the insurance cover they provide is in fact quite different.

Terminal illness cover means that your life insurance or mortgage life insurance policy will pay out the full amount if you are diagnosed with a terminal illness, rather than when you die. To qualify your life expectancy must be less than 12 months and cover is not available during the last 18 months of your life insurance, or mortgage life insurance policy term

Terminal illness insurance cannot be purchased as a stand-alone policy – it is always sold in combination with another policy but is generally included at no extra charge on all level term assurance and mortgage term assurance policies.
Critical illness cover on the other hand, is much more comprehensive. This type of insurance will pay out if you are diagnosed with one of the specified critical illnesses named on the policy.

A good way of demonstrating the difference between the two is to consider what would happen if you had a heart attack for example. Many heart attack victims can go on to live long and fulfilling lives. So although you may have a long recovery period during which time you have to give up work, you cannot claim under your life and terminal illness cover because you are expected to survive longer than 12 months. Critical illness insurance fills this gap since it pays out immediately and therefore provides much needed financial security during a traumatic time.

Critical illness insurance has long been less popular than life and terminal illness cover – in large part because the premiums are more expensive - but if you consider the fact that 1 in 5 men and 1 in 6 women will suffer a critical illness before their usual retirement age, it may well be worthwhile taking out.

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