Aegon UK's latest claim statistics have revealed that 28% of life claims are paid early under the terminal illness definition.
Some 98% of all life claims were paid out in 2015 to 646 families, with an average pay out of £83,000.
In total £26 million was paid out early for terminal illness claims, the protection insurer said.
Life policies also include the sometimes overlooked terminal illness benefit, which means the policy will pay out on diagnosis of an illness, where life expectancy is 12 months or less.
Dougy Grant, protection director at Aegon UK, said: "Terminal illness cover is a core element in protecting clients and an extremely important element of life cover. Terminal illness cases are always tremendously sensitive, but receiving an early pay out often provides a great deal of reassurance and peace of mind for the customer and their family and allows them to sort out their financial affairs.
"In that respect it's hugely encouraging that we've seen a significant rise in pay outs and been able to make a real difference. The rise in payments under the terminal illness definition is undoubtedly down to awareness and advisers can claim a big hand in bringing this to the attention of their clients."
