What is terminal illness cover and how does it work?

Terminal illness cover is a feature automatically included with most Australian life insurance policies that allows you to access your death benefit while you're still alive if diagnosed with a terminal medical condition. In Australia, terminal illness is typically defined as a condition where two registered medical practitioners (often including a specialist relevant to the condition) certify that you're likely to die within 12-24 months (the exact timeframe varies by insurer and policy), and there is no reasonable prospect of recovery. Common terminal illnesses include advanced metastatic cancer, end-stage heart failure, advanced motor neurone disease (ALS), and end-stage organ failure. When diagnosed with a qualifying terminal illness, you can claim the life insurance benefit early, providing funds while you're alive to pay for experimental treatments not covered by Medicare, modifications to your home for comfort and accessibility, palliative care and nursing assistance, clearing debts to ensure your family isn't burdened, fulfilling bucket list wishes during remaining time, and covering living expenses so family can spend time with you rather than working. The benefit is typically paid as a lump sum and is tax-free in most circumstances. Importantly, once you claim a terminal illness benefit, your life insurance policy ends – you cannot receive both the terminal illness payout and the death benefit. Some policies also have a survival period requirement, meaning you must survive for a certain period (like 14 days) after diagnosis before the benefit is paid. Terminal illness cover provides valuable flexibility to use your life insurance when you need it most, rather than only benefiting your beneficiaries after death.