Terminal Illness Benefit

The terminal illness benefit is an accelerated death benefit. It pays your life insurance proceeds early when you are diagnosed with a terminal condition expected to cause death within 12 months (or 24 months under some older policies). It is now a standard feature in Australian life insurance.

Eligibility requirements

You typically need:

1. Medical certification from two qualified medical practitioners (usually a treating specialist and an independent specialist).
2. Certification that the condition is incurable and will likely cause death.
3. A life expectancy statement of 12 months or less (24 months on some older policies).

Common qualifying conditions

• Advanced cancers with metastasis
• End-stage organ failure (heart, liver, kidney, lung)
• Advanced motor neurone disease
• Late-stage AIDS

How the benefit pays

The benefit usually equals the full sum insured, paid as a lump sum, which terminates the policy because the death benefit is exhausted. Some policies allow partial terminal illness claims so some death benefit remains.

Super-based policies

Superannuation-based policies offer specific advantages:

• Terminal illness benefits qualify for early release under compassionate-grounds rules
• Preservation age requirements do not apply
• Payments are tax-free under terminal medical condition release provisions, regardless of age or dependency status

Claims process

Insurers require comprehensive medical evidence:

• Specialist reports detailing diagnosis and prognosis
• Treatment history and current treatment plans
• Specific life expectancy statements

Processing usually takes 2 to 8 weeks once medical evidence is complete.

What the benefit funds

Terminal illness benefits typically support:

• Income replacement when work becomes impossible
• Experimental or additional therapies not covered by health insurance
• Palliative and end-of-life care (home care or hospice)
• Family travel and time together
• Debt repayment to reduce the family's financial burden
• Final arrangements

Modern policies recognise that terminal diagnoses often come 12 to 24 months before death, allowing the insured to benefit from their own cover rather than only providing for survivors.