A life insurance payout goes to whoever is listed as the beneficiary on the policy which is decided by the person who takes out cover. Luckily, payouts tax-free and can pay out more than $1 million. On average, it takes insurers 2.5 months to accept or reject your claim but processing usually only takes around 2 weeks.
Generally, a life insurance payout is a one-off lump sum payment in the region of $100,000 to $1.5 million. It goes to the person or persons the policyholder (the person who has passed away) has nominated as their beneficiaries – this is usually a family member or loved one.
The beneficiaries of the person who died will generally need to submit a claim to the life insurer. Most people will be aware that they have been listed as the beneficiary – the person who took out the policy should usually inform you. But if you're not made aware, you can make a search on the ASIC unclaimed money register.
Waiting on a life insurance payout can be a stressful time. It's normal to wait a while. It takes life insurers an average of two and a half months to accept or reject a claim.
Gary Ross Hunter
Insurance and innovations editor
These are the four main steps to a life insurance payout.
The insurer's information should be available on the policyholder's certificate of insurance.
You'll need to submit a certified copy of the death certificate when you get in touch with the insurer. This is so they can verify that the policyholder has passed away.
The insurer will send you a claims form. You'll need to fill that out and provide any information it asks for. For example, the insurance policy details outlining that you are the person the policyholder has listed as their beneficiary. You can usually fill it out and submit online.
Life insurance payouts are usually made to the beneficiary within two weeks of the claim being submitted. If your claim is denied, you can file an internal dispute with your insurer or the Australian Financial Complaints Authority.
| Response | Male | Female |
|---|---|---|
| No | 53.8% | 50.62% |
| Yes | 46.2% | 49.38% |
In most cases, a life insurance payout should take less than two weeks to be processed. However, this is just the processing time. It usually takes insurers longer to decide whether to accept or reject your claim. According to the latest APRA data, it takes life insurers (policies bought online) an average of 2.5 months to do this.
NobleOak has the shortest average claim time of 0.9 months. TAL take an average of 3 months and Clearview takes 5 months.
Processing times
Processing times are shorter. According to the latest Australian Prudential Regulation Authority (APRA) data on this:
Yes, this is known as a terminal illness benefit and it's included in most policies. For this to happen, your medical practitioner needs to state that you don't have much longer to live. Depending on the insurer, you can generally have your insurance paid out if it is documented that you have less than 12 months or 24 months left to live.
To claim under a terminal illness benefit, the process is much the same. You or the beneficiaries you've listed need to call the insurer and they'll provide you with the paperwork and next steps you need to take. Hopefully, it's a relatively straightforward process for you during this incredibly difficult time.
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