Why cover?
  • affects 1 in 4 women / 1 in 5 men before retirement
  • 94.1% of the critical illness claims are paid
  • protect yourself and your family if you get seriously ill
Why us?
  • get the cover that will pay when you need it
  • save up to 35%, cover from £5 a month
  • free, fast and without obligation quotes
Insurers: Aviva, Legal & General, Liverpool Victoria, Scottish Widows, Vitality, Zurich

My life insurance policy has an option where, if I get a terminal illness, I will get a certain percentage of the face amount. Is this the same thing as critical illness insurance?

In the world of insurance, words matter. And in insurance, “terminal” and “critical” are not the same.

The terminal illness cover (usually only available with a life insurance policy) is also called the accelerated death benefit. It is called thus because instead of waiting for the insured to pass away, the proceeds (or a portion of it) is given to the living Insured once it is ruled that he has a terminal illness. That means that he can use the supposed death benefits for medical expenses or improve the quality of life during his last days.

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To further illustrate the difference between the two, here is a table that outlines some of the features of both coverages:

Features Critical illness cover Accelerated death benefit rider
Reason for payment

Diagnosis of a covered critical illness. It will not pay if the illness is not part of the list of serious illnesses.

Diagnosis that one is terminally ill. This means that it is medically reasonable that the insured will die within 12 months from the date of diagnosis. This will pay regardless of what illness, as long as the prognosis is that the Insured will not survive the illness.

How this can be bought

This can be bought as a separate policy, as a cover combined with life insurance (where an Insured can claim one – either at the diagnosis of critical illness or upon his death) or as a rider bought along with a life insurance or health insurance policy.

This can only be bought with a life insurance policy. This can’t be a standalone policy.

How the proceeds are paid

The insured gets the full amount.

Usually, a portion of the life insurance proceeds are “advanced”. The rest of the insured amount will be paid to the beneficiaries upon the death of the Insured.

Primary purpose of the cover

This is to help the Insured get the treatment he needs in the hope of recovering from the critical illness.

This is to make the Insured comfortable during his last days or for him to have funds to fulfil his “dreams” while he is alive – such as travel abroad.

Length of cover

The insurance usually terminates once the claim is paid (particularly if the insurance is a standalone policy).

The insurance is still effective until the death of the insured.

The good news about critical illness cover. Most critical illness covers also have a terminal illness rider.  This means that if you are terminally ill, you can claim the entire sum insured.

Pros and Cons of the Terminal Illness Rider vs. the Accelerated Death Benefit Rider

Terminal Illness Rider (Of a Critical Illness Policy) Accelerated Death Benefit Rider (of a Life Insurance Policy)
  • You get the full insurance amount.
  • The terminal illness does not have to be a critical illness. As long as it meets the definition of terminal illness, it will be payable.
  • You can get some money to help make your life comfortable while saving up the rest for your family.
  • Once you make a clam, the policy will terminate and no further payments will be made.
  • The terminal illness claim is only available before a specific time prior to the expiry of the policy. For instance, you cannot make the terminal illness claim 6 months before the policy is about to end.
  • The Accelerated Death benefit is usually only a portion of the Sum Insured. Your beneficiaries will get the rest of the balance.

The Verdict

Consolidate your coverage. If you want to have a more comprehensive protection plan and will buy life cover and critical illness cover, just choose one of either accelerated death benefit or the terminal illness rider, so you can save up on premiums.

Know more about combined life and critical illness insurance by reading: Is combined life and critical illness insurance a better deal?

Last updated on: 18.1.2013

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