Life Insurance Claims

Making a life insurance claim: Step-by-step

If you're about to make a claim or make sure your next of kin is familiar with the process, here are the simple steps to keep in mind:

Good to know

If your claim is for an ongoing income protection payment, may need to maintain your policy by updating your insurer with your health status.

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Life insurance claim statistics

The table below shows claims and claims related dispute information for life insurance bought through insurers directly, financial advisers and held within a superannuation fund. Sourced via Moneysmart's claim comparison tool for 1 July 2020 and 30 June 2021 period.

• Direct from insurer
• From financial adviser
• Through super

Things to keep in mind when making a claim

• Check the life insurance policy documentation. Life insurance policies and procedures do vary between providers, so it's worth checking the policy document with care. Or, you can simply contact the provider for verification.
• Contact the insurance provider as soon as possible. Notify the insurer of your intention to claim at the first opportunity in what will understandably be a trying time for the family.
• Keep a detailed record of your calls and contact. You may have to contact the life insurance provider on a number of occasions by phone, in writing, by email etc. Make sure that you keep notes of when you made contact, names of people you spoke to, copies of any letters and correspondence that you send in, etc.
• Be organised and get all the required documents ready as soon as you can to start lodging in your claim. This can include things such as a copy of the death certificate and details about the policyholder’s doctor/surgeon.

How to sort out a life insurance dispute or complaint

1. Check your policy. Before doing anything make sure you've read through your life policy to make sure you are actually covered. Check your policy, including the small print, to see whether you actually have a case or whether the insurance firm is acting in line with its terms and conditions.
2. Speak to your provider. If you believe there is an issue after checking the policy, you should contact your insurer and explain your concerns and discuss what can be done to resolve the dispute. Often, a satisfactory conclusion can be reached simply by speaking to the insurer and discussing the issue.
3. Put in a complaint with your insurer. If you're unhappy with the resolution after speaking with your insurer, you will need to go through your insurers dispute resolution process. This generally requires putting your complaint in writing. Your insurer will give you a timeframe of when this issue should be resolved.
4. If all else fails: Australian Financial Complaints Authority. If you have gone through the dispute resolution process and you are still not satisfied with the outcome, you should contact the Australian Financial Complaints Authority (AFCA) or in the past, the Financial Ombudsman Service (FOS). Escalating your dispute may mean that you have to wait even longer for a resolution but if you have exhausted other avenues, this may be the route to take in order to get the dispute resolved once and for all.

Pre-existing medical conditions and life insurance disputes

A common cause of life insurance disputes revolves around pre-existing medical conditions. Each year, the AFCA is contacted by hundreds of cases of people following their income protection claim being rejected. Life insurers have typically rejected claims due to policyholders not informing them of pre-existing medical conditions related to their claim.

So, it's super important to disclose all known information to insurers before signing the life insurance contract. Many applicants will withhold details of pre-existing conditions or lifestyle habits in an attempt to save on their policy premiums. As part of the duty of disclosure in the contract, it is the individual's responsibility to state all information to the insurer to avoid this situation from happening.

Definition of a pre-existing medical condition

A pre-existing medical condition is commonly recognised as any condition:

• That was previously diagnosed or investigated
• Where there were symptoms that lead to the diagnosis prior to application
• Or event that lead to the claim occurring took place
• Prior to the official commencement date of the policy or the effective date of any increase of the policy sum-insured.

Life insurance claims and taxes

A life insurance benefit payout is not taxable at the time of a claim if the nominated beneficiaries are financially dependent on you. These generally include:

• Spouse/partner;
• Child/children under the age of 18;
• Other financial dependents, such as siblings or ageing parents.

If you have nominated specific individuals as the benefactor of your life insurance policy and they are not financially dependent on you, there may be some tax implications and we'd encourage you to speak with a tax specialist.

Read more about life insurance tax deductions.

Your frequently asked questions answered

• What types of events does life insurance cover?

  Life insurance primarily covers death. Many policies also include a terminal illness benefit, which pays out a portion or all of the sum insured if the policyholder is diagnosed with an illness likely to result in death within a specified period, usually 12 or 24 months. Some life insurance policies may also offer a Total and Permanent Disability (TPD) component, which can be claimed if you become totally and permanently disabled and unable to work.

• What documents are required to make a life insurance claim?

  Generally, you will need to provide the original life insurance policy document, the policy schedule, the deceased's death certificate, medical reports or a doctor's statement confirming the cause of death, and proof of your identity. Depending on the claim type and circumstances, additional documents such as a will or probate may be requested.

• What if there is no nominated beneficiary on the policy?

  If no beneficiary has been nominated, the life insurance benefit will typically be paid to the deceased's estate. The funds would then be distributed according to the deceased's will or, if there is no will, according to the laws of intestacy in the relevant state or territory.

• Can a life insurance claim be rejected due to non-disclosure?

  Yes, claims can be rejected if the policyholder failed to disclose all relevant information when applying for the policy. This includes pre-existing medical conditions, hazardous occupations, or dangerous hobbies. Insurers have the right to deny claims if there was a breach of the duty of disclosure.

• Is the claims process different for Total and Permanent Disability (TPD) or Terminal Illness benefits?

  Yes, the claims process for TPD or Terminal Illness benefits differs from a standard death claim. For TPD, you typically need medical evidence proving total and permanent disability and an inability to work. For terminal illness, you require a diagnosis from a medical practitioner confirming a life expectancy of 12 or 24 months. These claims usually involve more detailed medical assessments and documentation.

• What happens if the policyholder dies overseas?

  If the policyholder dies overseas, the claims process will require an official death certificate issued by the foreign authority. This document may need to be translated into English and certified. The process can sometimes take longer due to international legal and administrative requirements.

• How are life insurance benefits paid to a minor beneficiary?

  If a beneficiary is under 18 years old, the life insurance payout cannot be made directly to them. The funds are usually held in trust by a legal guardian or appointed trustee until the minor reaches adulthood. Alternatively, the funds may be paid into a court-controlled trust. It is advisable to seek legal advice on the best approach for managing funds for a minor.

• Can I claim on a lapsed or cancelled policy?

  No, generally you cannot claim on a lapsed or cancelled policy. For a claim to be valid, the policy must be in force and all premiums must be up to date at the time of the event that triggers the claim. If a policy has lapsed due to unpaid premiums or was formally cancelled, cover would no longer exist.

• Who is considered a financially dependent beneficiary for tax purposes?

  For tax purposes, a financially dependent beneficiary typically includes your spouse or partner, your children under 18 years of age, and other individuals who were reliant on you for financial support. This could include adult children with disabilities or ageing parents. It is best to consult a tax specialist for specific advice.

• Do I need a lawyer to make a life insurance claim?

  For straightforward claims, you typically do not need a lawyer. The insurer's claims department can guide you through the process. However, if a claim is complex, disputed, or involves a significant sum of money, engaging a lawyer or financial adviser can be beneficial, especially if you need assistance with documentation or negotiations.

• How does claiming life insurance through superannuation work?

  If your life insurance is held within superannuation, the claim is initially made to the super fund trustee. The trustee then assesses the claim against the policy terms and conditions. If approved, the benefit is paid to the super fund, which then determines who receives the payment as per superannuation law and your nominations. This process can sometimes involve additional steps and take longer compared to a direct policy claim.