Glossary · UK
What is Terminal Illness Benefit?
A standard feature of most life insurance policies that pays out the full sum assured early, while the policyholder is still alive, if they are diagnosed with a terminal illness and given a limited life expectancy.
Full Definition
Terminal illness benefit (sometimes called terminal illness cover or an accelerated death benefit) is included as standard in the vast majority of UK term life insurance and whole of life policies, at no extra cost, and pays out the full sum assured immediately on diagnosis of a terminal illness, rather than waiting until the policyholder has died. Insurers typically define a qualifying terminal illness as one that, in the reasonable opinion of the policyholder's treating doctor and confirmed by the insurer's own medical examiner, is expected to lead to death within 12 months, and the policy must still be in force (with premiums paid up to date and within the original policy term) at the time of diagnosis for the benefit to apply. Because the payment is simply an early release of a death benefit the policy would have paid out anyway, receiving terminal illness benefit does not increase the total amount paid under the policy, and once it has been paid the policy itself ends, so no further claim (including a later death claim) can be made against it. The main practical value of the benefit is giving a policyholder and their family access to the money while they are still alive, allowing it to be used for medical costs, paying off a mortgage, or simply spending time together, rather than only becoming available to the family after death.