Written by · Reviewed by Smiths Insurance & KiwiSaver — licensed Financial Advice Provider (FSP712931) · Last updated 2026-10-20

How to use life insurance while alive in NZ

Yes, in one case. Many New Zealand life policies include a terminal illness benefit that pays the sum insured while you are alive if a medical practitioner confirms the illness is expected to lead to death within 12 months. Momentum Life's Quick Life works this way, and paying it ends that person's cover. Other payments while alive come from separate covers: trauma insurance, total and permanent disability (TPD) and income protection.

In short

Can you access life insurance benefits while you are still alive?

Not in general. Life cover is designed to pay when the life insured dies. There are three exceptions, and they work differently.

  1. The terminal illness benefit is built into life cover and pays the sum insured early.
  2. Living covers such as trauma, TPD and income protection are bought separately, or as riders on some policies, and pay on illness or injury.
  3. Cashing in is not available on NZ term and guaranteed-acceptance policies, because they build no cash value. See surrender value in NZ life insurance.

How the terminal illness benefit works

A terminal illness benefit pays the life insured the sum insured early when a doctor confirms a short prognosis. QuoteHub's terminal illness benefit page compares insurers in more detail. In the two wordings we read, the trigger is a prognosis of 12 months or less: Fidelity Life defines terminal illness as likely to die within 12 months, certified by the treating specialist and confirmed by a second specialist the insurer nominates, and Chubb's brochure describes a diagnosis likely to result in death within 12 months (Fidelity Life wording, Chubb brochure). Both describe an early payment of the Life cover sum insured, and both also describe a smaller partial payment for listed conditions. Details such as who must certify and any cap differ between insurers, so read your own wording.

Quick Life: the exact terms

Momentum Life's Quick Life wording (November 2025) defines terminal illness as "an illness that, even with treatment, is expected to lead to death within 12 months". It must be confirmed by a medical practitioner Momentum approves, and Momentum can ask for an independent second opinion from a specialist, at its cost, which "will be final".

Quick Life What the wording says
Entry age 18 to 65; no health questions at application
Cover $50,000 to $300,000 per life insured, rising 3% a year to 75 or a $500,000 cap
Pays on Accidental death, death from any cause, terminal illness
First 2 years Terminal illness is not paid if directly or indirectly related to a pre-existing condition, suicide or intentional self-harm
After 2 years Pre-existing conditions are covered, except a few specific conditions that can be permanently excluded in your policy schedule
When paid Cover for that person ends when a terminal illness benefit is paid
Always excluded Alcohol or drug effects (unless a prescribed drug was taken as instructed by a registered NZ doctor), war, terrorism, criminal activity, and listed dangerous jobs or pastimes

The glossary defines pre-existing as any illness, condition or symptoms you had during the 2 years before the policy started (or before an increase or reinstatement), including anything you had treatment or advice for, noticed symptoms of even if undiagnosed, or would reasonably have been aware of. It adds named markers: very high blood pressure, cholesterol over 7.0, a BMI over 40, or complications related to diabetes. The wording promises a premium refund for a death from a pre-existing condition in the first 24 months when no claim is payable; it does not mention a refund where a terminal illness claim is declined.

Momentum's site also says Quick Life is not available to applicants diagnosed with a terminal illness or in palliative or hospice care. That rule is on the page and not in the wording. See the Quick Life page and our page on guaranteed acceptance life insurance with terminal illness.

Funeral Insurance is different. Its wording has no terminal illness benefit, and in its first 24 months it pays only for accidental death within 90 days of the accident.

What medical certification proves a 12-month prognosis?

The wording sets the standard: an approved medical practitioner confirms it, and a specialist second opinion can overrule. We found no published checklist of documents in Quick Life's wording for this claim type. Momentum's claims page lists a Terminal Illness claim form, and its claims line is 0800 108 108 (Momentum Life: Claims). Ask the insurer for the form and for the evidence it will need before your specialist writes anything. Our guide to claiming life insurance covers the general process, and if a decision is disputed you can go to the Insurance & Financial Services Ombudsman (IFSO).

Living benefits: trauma, TPD and income protection

These are separate covers with their own tests.

For definitions and comparisons see trauma insurance, life versus trauma insurance and TPD insurance.

QuoteHub's Premium Index shows ranges from insurers' published rate cards as at 8 September 2026. Basis: indicative monthly cost, stepped premiums, non-smoker, occupation class 1, standard rates with no loadings or exclusions, as the range across the insurers that priced each row. Your own premium depends on underwriting.

Cover Age 40 Age 50 Age 60
Trauma $100,000, man $35 to $50 $110 to $130 $300 to $375
Trauma $100,000, woman $35 to $50 $70 to $100 $160 to $225
TPD $250,000 any-occupation, man $20 to $25 $50 to $80 $275 to $375
TPD $250,000 any-occupation, woman $20 to $30 $60 to $100 $250 to $400

Those are monthly amounts. Momentum did not price trauma or TPD in the Index, since it does not sell them. See the Premium Index for trauma.

Does an early payout reduce the final death benefit?

For a terminal illness benefit, yes in the sense that no death benefit follows. It is an early payment of the same sum insured. On Quick Life the person's cover ends when the benefit is paid, and if someone else on a joint policy is still covered, Momentum sends an updated schedule. Where a policy links living covers to life cover, paying one can reduce the other: Fidelity Life's wording says a paid trauma claim "will reduce the Life cover sum insured".

Is the payout taxed?

Inland Revenue says "Generally, insurance payouts are excluded income" and that income protection payouts replace lost income and are generally taxable (Inland Revenue). That page does not cover terminal illness or trauma lump sums by name, so for a specific payout ask your insurer or an accountant. See life insurance and tax in NZ.

Where Momentum fits

Before relying on any early payout, know who would pay it: A.M. Best's rating for Momentum Life Limited is B (Fair), which Momentum's own table puts in its "vulnerable" group, last affirmed on 11 February 2026. It is not a recommendation; see Momentum's financial strength page. Quick Life suits people who may be declined or loaded elsewhere, or who want cover in place without health questions. Both of Momentum's products restrict the first two years, and a healthy person can usually get more cover for less through fully underwritten cover from an adviser. The buttons on this page lead to Momentum's online quote. For how guaranteed acceptance works, see the guaranteed acceptance hub.

Advice is provided by Craig Smith Business Services Limited, trading as Smiths Insurance & KiwiSaver, a licensed Financial Advice Provider (FSP712931). This page is general information, not advice. QuoteHub is a Momentum Life partner, and Smiths Insurance & KiwiSaver may receive a commission on Momentum products; see how we are paid. Last reviewed 20 October 2026.

Frequently asked questions

Can I use my life insurance if I am diagnosed with a terminal illness?

If the policy includes a terminal illness benefit and the illness is expected to lead to death within 12 months, confirmed as the wording requires, it can pay the sum insured early. Momentum Funeral Insurance has no such benefit.

Does Quick Life pay a terminal illness benefit in the first two years?

Not if the terminal illness is directly or indirectly related to a pre-existing condition, suicide or intentional self-harm. Terminal illness from a new condition is covered from the start.

Can I borrow against or cash in a term life policy?

No. Quick Life says it does not build up any cash or surrender value.

Is trauma cover the same as a terminal illness benefit?

No. Trauma pays on diagnosis of a listed condition. A terminal illness benefit pays on a short prognosis.

References

Read the full insurance guides

Compare your cover with a licensed NZ adviser · free, no obligation.

Start your free comparison

Compare panel options first. A licensed NZ adviser can then review existing cover or help with an application.

Free, no obligation. Licensed NZ advisers · Craig Smith Business Services Ltd, FAP FSP712931.

Explore related pages: Life Insurance, Income Protection, Health Insurance, Trauma Insurance, Free Will.