How does terminal illness cover work?

Written by 
Bill Tsouvalas
Bill Tsouvalas is the managing director and a key company spokesperson at Savvy. As a personal finance expert, he often shares his insights on a range of topics, being featured on leading news outlets including News Corp publications such as the Daily Telegraph and Herald Sun, Fairfax Media publications such as the Australian Financial Review, the Seven Network and more. Bill has over 15 years of experience working in the finance industry and founded Savvy in 2010 with a vision to provide affordable and accessible finance options to all Australians. He has built Savvy from a small asset finance brokerage into a financial comparison website which now attracts close to 2 million Aussies per year and was included in the BRW’s Fast 100 in 2015 as one of the fastest-growing companies in the country. He’s passionate about helping Australians make financially savvy decisions and reviews content across the brand to ensure its accuracy. You can follow Bill on LinkedIn.
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, updated on November 25th, 2021       

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Terminal illness cover is part of life insurance and is there to cover you financially should you be diagnosed with a terminal illness. While you and your loved ones battle out this difficult time, you can rest assured knowing that you and your loved ones are protected financially. This is a basic guide to understanding how illness cover works.

What is terminal illness cover?

The definition of what is defined as terminal illness will differ based on your policy. Insurers that provide a terminal illness cover outside of a superannuation fund define it as a terminal illness that leaves you with 12 or 24 months to live. Your insurer will need medical confirmation that you have a terminal illness in order to pay out the benefit to your beneficiaries. If your cover is held inside a superannuation fund you can access a terminal illness benefit if you have sustained an injury or illness that will cause your death in the allocated time frame. You will have to check the fine print of your policy or speak to your insurer to find out which terminal illness timeframes apply to the cover you have taken out.

Terminal illness cover vs critical illness cover

At a glance, you might think that these two covers are more or less the same thing, but it is not.

Difference between terminal illness vs Critical illness cover

Critical illnessTerminal illness
Can be purchased as a standalone product or part of life insurance policy.Cannot be purchased as a standalone product.
You are a paid a lump sum payment if you are diagnosed with a critical illness listed in the policy document.Provides you with a benefit if you have been informed that you 12 – 24 months to live.
The insured must live for a minimum number of days, which is usually 20 – 30 days, after being diagnosed before benefit is paid out.Can have access to the benefit once you are informed of terminal illness.

What can this cover do for you?

Injury and illnesses can strike when you least expect it and change life as you knew it in a matter of seconds. According to the Australian Health Institute of Health and Welfare, there are half a million Australians who are hospitalised for injuries and a further 12,000 people die. MRA further revealed that 90% of claims for terminal illness have been due to cancer. Factoring this in when you take out a life insurance policy can ease the financial strain on your family. Terminal illness cover can help your family cover things such as:

  • Medical bills from the moment you are diagnosed.
  • Cost of transport to and from a specialist medical facility
  • Replacing a family members income if they take the time off to take care of you
  • Cover the cost of accommodation if you need to be close by to a specialist
  • Spend with your family how you see fit to spend your final days with them in a happy state of mind

Are you covered if you take out the policy after you have been diagnosed?

Unfortunately, you will not be covered after you have been diagnosed with a terminal illness. It is advisable to get this cover when taking it out with your life cover to provide you and your loved ones with the financial protection you need. This is why it is important that you submit accurate information about your medical history and undergo medical examinations. This will help insurers provide you with adequate cover before you fall ill. It is important that you check your policy carefully, as some terminal illness covers limit your benefit payment to a certain amount while others don’t.