Life insurance and cancer

You need to check your existing life insurance policy if you are diagnosed with cancer. Or make sure that a new policy suits your needs.

What is life insurance?

Many of us have life insurance because we take it out when we get a mortgage. The point of having the life insurance is that if we die, it pays out to cover the mortgage.

Life insurance is useful for two main reasons:

• if you die it can pay off debts - such as a mortgage

• it can pay out money for your family after you die

Some life insurance policies include terminal illness cover. This means if you are diagnosed with a terminal illness and have less than 12 months to live, you can make a claim. The insurer will pay out the money straight away. You can keep the payout even if you live longer. Check with your insurer to see whether this is included in your policy.

If you are diagnosed with a critical illness, some life insurance companies will also pay out. Check with the insurer. 

Can I get life insurance if I have cancer?

If you have or have had cancer, you may find it more difficult to get life insurance. 

The insurance companies take certain factors into account if you’ve had cancer. These include the type of cancer you have and the stage it is at.

With your permission, the company will write to your doctor or hospital. They will ask for medical details that could affect your policy. They might also ask you to have a medical examination before they will issue your policy.

When a policy is issued, the first premiums will be high. Because that’s when the insurance company has the greatest risk. For most cancers, as time goes by the risk of the cancer coming back gets lower.

Talk about your individual case with your life insurance company. They can tell you more about how this will personally affect you.

There are special rules about insurance in the Disability Discrimination Act (DDA). This Act applies to you if you have cancer, or have had cancer in the past.

If you already have life insurance

You might already have a life insurance policy from before you were diagnosed with cancer. The insurance company should honour it as normal, as long as you were honest about your medical history when you took the policy out.

You might find it difficult to increase the value of your policy for some years. But it’s important to keep it up. That will be easier than starting a new life insurance policy after your cancer diagnosis.

You may want to increase your cover. Ask your adviser about using a 'special event option'. This means you can increase the cover with no underwriting, subject to certain events happening in your life. This includes the birth of a child, marriage or moving house.

Different types of life insurance

If you are thinking of buying life insurance, talk with an independent financial advisor or insurance broker. They will help you get the right insurance for your situation. 

There are different types of life insurance including:

Term life insurance

This is the most basic type of life insurance. There are 3 types of term life insurance:

• Level term insurance - this type of insurance pays a fixed amount to your loved ones, should you die within the term of the policy. The amount paid out is fixed at the start of the policy and does not change.
• Decreasing term insurance - with this type of insurance the payout your loved ones would receive decreases over time. This insurance is often taken out with a mortgage.
• Increasing term insurance - this type of insurance means that the amount paid out increases over the course of the policy. This is usually in line with inflation.

Whole of life insurance

This type of policy is ongoing and covers you for the whole of your life. These policies can be more expensive. Whole life insurance pays out a lump sum at whatever age you die.

Family income benefit insurance

Family income benefit is a type of life insurance which will pay out a regular income to your loved ones if you die, rather than a one off lump sum payment. If you die after the term of the policy has finished, your loved ones will not get monthly payments. 

Endowment insurance

An endowment policy is a long term investment product that also includes a life insurance policy. You pay in a monthly amount for a set term and get a cash lump sum at the end of the policy. Part of the premiums you pay will be invested - such as in shares or property. The value of the investment can go up or down. 

Checking your life insurance policy

When you're choosing your life insurance, be very careful that the policy is right for you and your family. Review the insurance regularly to make sure it’s keeping up with your changing personal and financial circumstances.

Life insurance is a long term commitment. Never surrender a policy without taking expert advice.

Making a complaint about a life insurance policy

Complain to the broker, financial adviser or salesperson who arranged your policy if you’re not happy with the service you’ve been given. Your policy document will have details of the complaint procedure.

If you can’t get your complaint sorted out at this level, you can contact the Financial Ombudsman Service.

Or you can contact the Financial Conduct Authority (FCA). These services are free to the public.