What is Terminal Illness Insurance?

The insurance industry is full of jargon, so the following are some commonly used terms to describe the types of health insurance products that are available.

Whilst the Financial Services Authority (FSA) distinguish the various health insurance policies available between Pure Protection and General Insurance, the definitions used here are as those determined by the CII (Chartered Insurance Institute).

Terminal Illness Cover (TIC) is a type of health insurance that pays out a lump sum in the event of the diagnosis of the life assured is suffering from an advanced or rapidly progressing incurable disabling terminal illness where, the life expectancy will be less than twelve months. It is a rider benefit added to Life Assurance policies such as Term Assurance and Whole of Life policies.

Why would I need Terminal Illness Cover?

TIC should be considered for earners and non-earners who may at some time in the future find themselves in the potentially unfortunate position in being unable to earn or receive income from the household’s main earner due to early death.

Generally TIC is a way of mitigating or reducing the financial effects of an adverse life event relating to you, your partner’s or family’s shortened life expectancy.  For example, the lump sum could be used to pay off a mortgage, assist with household expenditures, or pay for the medical care of the terminally ill sufferer.

Unlike Critical Illness where death is uncertain, it is not possible to recover from a terminal illness.

How much will TIC pay me on a claim?

The purpose of TIC is to provide a lump sum amount on the diagnosis of a terminal illness. It is not related to income, but to the capital needs of you or your family and therefore technically any amount can be assured. However it is usually dependent upon the suitability and affordability to your personal circumstances.

How long will I continue to receive TIC payment?

Terminal illness payment is technically an accelerated death benefit, usually attached to a Life Assurance policy. This means after the lump sum assured or benefit is paid out, your Life Assurance contract will cease.

How do I pay for Terminal Illness Cover?

TIC is a rider benefit added to a Life Assurance policy such as Term Assurance or Whole of Life. Once the amount of benefit you require has been determined your monthly payment or premium for protection under the policy or cover will be offered to you by the insurer’s underwriter after they have reviewed a completed personal questionnaire relating to your occupation and lifestyle including in some cases a medical report.

The premiums may be guaranteed where the monthly payment and benefit is level, i.e. it does not change for the term of the policy, or may be reviewable every one, three, five or ten years depending on the insurance provider i.e. the insurance company underwriting the policy.

How should I apply for Terminal Illness Cover?

The first and most important step after you have decided you may have a need for TIC cover is to have a discussion with us to provide you with independent financial advice.

Once we have agreed what the most suitable type of Life Assurance cover which TIC is added for your particular circumstances we make an application and complete an underwriting questionnaire on your behalf to take out a protection policy based on how much you can afford and the amount of cover required, for a length of time to match your needs.

Want to know more?

Talk to one of our qualified financial advisers on 01553 777600 or e-mail us at enquiries@ringassociates.co.uk

Also you may want to read the articles by accessing the following at the Directgov website http://www.direct.gov.uk/en/MoneyTaxAndBenefits/ManagingMoney/Insurance/index.htm