Terminal Illness and Death Benefit Claims

If you have ‘landed’ on this page, then chances are you are dealing with a very sad development in your life or the life of someone close to you. Hopefully, you will not need the assistance of an insurance lawyer when dealing with a death benefit or terminal illness claim, but unfortunately, situations do arise where insurance companies, for various reasons, decline these claims.

What are terminal illness and death benefits?

These two terms are very closely aligned.

A death benefit is payable to a person’s dependants if the policyholder passes away.

A terminal illness benefit is a death benefit paid to the insured person prior to death if they have met certain medical criteria, usually that they have 12 to 24 months to live.

Who is a death benefit paid to if the claim is successful?

Death benefits will either be paid to beneficiaries under a binding nomination, or in the absence of a binding nomination, they will be paid in accordance with the specific insurance policy. 

A binding nomination is a formal document that the insured person completes and submits to their insurer (both for policies inside or outside super). This informs the insurer as to whom the death benefit is to be paid. Binding nominations can only be made to dependants of the policyholder.

Crucially, binding nominations must be re-submitted at regular intervals, usually every three years, to be effective.

Where there is no binding nomination, the trustee will pay the death benefit to:

1. a dependant(s) of the deceased; or
2. the executor of their estate for distribution in the Will of the deceased; or
3. a non-dependant.

Who is considered a dependant for death benefit payments?

Dependants include:

• the spouse or de facto of the deceased;
• any child of the deceased (minors and adults);
• any person in an interdependency relationship with the deceased prior to their death.

An interdependency relationship could include circumstances where: 

• two people were in a close personal relationship (not a marriage or a legally defined ‘de facto’ partnership); 
• two people were living together for a significant period of time;
• one party was reliant on ongoing financial support from the deceased; 
• one party was reliant on the care and support of the deceased (for example, due to mental or physical disability).

Can I appeal a rejected terminal illness or death benefit claim?

The reasons why an insurer might deny payment of a terminal illness or death benefit claim will typically be due to some medical evidence/opinion.  

You can challenge a rejected claim, and in fact, you can challenge any adverse decision of an insurance company. There are three options available.

1. The first step is to make an Internal Dispute Resolution (IDR) complaint. Your dispute may resolve at this stage.
2. If IDR does not resolve your dispute, you can appeal the decision to the Australian Financial Complaints Authority (AFCA). To be eligible to appeal to AFCA, you must first have partaken in step 1 above (an IDR complaint).
3. At any point, you may commence court proceedings. Very strict time limits apply to court actions.

Get help from an insurance lawyer

Getting the right legal advice and assistance early on in any insurance dispute is the key to ensuring that everything which can be done is done and as quickly as possible. Acting early will maximise the prospects of either convincing the insurer to reverse their initial decision to not accept the claim, or to have a court or tribunal order the insurer to pay out on the policy.

If the dispute relates to a terminal illness benefit, then time is unfortunately a critical thing, and getting the right legal advice about the best way to proceed to ultimately be paid the proceeds of the policy will make all the diffierence.