These two types of cover although sounding similar are in fact very different. Terminal illness cover is included with no additional cost on most life cover policies. Terminal illness cover allows the policyholder(s) to claim their life cover before dying if within the last 18 months of the policy term they are diagnosed with a condition that in the opinion of the insurance company's medical advisor would cause death within 12 months.

Critical illness cover protects the policyholder(s) against a range of specified critical illnesses including conditions such as cancer and heart disease, which need not result in death. (For a full list of the conditions covered one should review your chosen company's key features document.) In fact to qualify for a claim on most critical illness policies one normally needs to survive 14-28 days upon diagnosis of a condition, which is why it often makes sense to include life cover within a critical illness policy. Life cover is normally available at very little extra cost.

You may insure for either life cover only or critical illness cover only or both risks on one policy. Insuring for both risks on one policy is cheaper, however, a policy will only pay out once and therefore if a policy covering both risks pays a critical illness claim then the policy will end leaving no life cover. It is generally better to have a separate policy for life cover and critical illness cover, which will produce two amounts of cover.

If you do select separate policies for life and critical illness cover one may reduce your overall cost substantially by choosing a lower level of critical illness cover (which is three times the cost of life cover) than life cover. Most people may justifiably choose a lower level of critical illness cover than life cover since critical illness cover is simply producing a lump sum to help you adapt your life to an illness whilst a life cover policy is replacing your entire financial existence.