Does funeral insurance pay out for terminal illness in NZ?

Written by Henry Smith · Reviewed by Smiths Insurance & KiwiSaver, licensed Financial Advice Provider (FSP712931) · Updated 2026-10-20 · Reviewed quarterly, when the underlying data is restated.

Financial advice is provided by Craig Smith Business Services Limited, trading as Smiths Insurance & KiwiSaver, a licensed Financial Advice Provider (FSP712931). QuoteHub is a trading name.

It depends on the insurer, and Momentum Life's Funeral Insurance does not. Its benefit is payable only on death, so a terminal illness diagnosis pays nothing early. Some other funeral policies and many life policies do include a terminal illness benefit, commonly when death is expected within about 12 months, and each has its own start date and limits.

A terminal illness benefit is an early payment of an insured sum to the person who is ill, made on a specialist's confirmation that death is expected within a stated time, usually 12 months. Momentum Life has two products that look similar from a distance. Funeral Insurance, for ages 40 to 75, pays $3,000 to $30,000 on death and has no terminal illness benefit. Quick Life, for ages 18 to 65, pays $50,000 to $300,000 on accidental death, death from any cause and terminal illness, and ends when the terminal illness benefit is paid. Both restrict the first two years: Funeral Insurance pays only for accidental death in its first 24 months, and Quick Life excludes pre-existing conditions and suicide for its first 2 years. Total funeral premiums can end up larger than the benefit, and the benefit may not cover the whole funeral.

Does funeral insurance offer an early terminal illness payout?

Not as a rule. The answer differs by product.

Product	Early payment on terminal illness	Notes
Quick Life, Momentum Life	Yes, if death is expected within 12 months	Not paid in the first 2 years if linked to a pre-existing condition or suicide. Cover ends when it is paid
Funeral Insurance, Momentum Life	None	Pays on death only. The first 24 months pay for accidental death only
NZ Seniors and OneChoice funeral cover (Pinnacle Life)	Yes, 100% of the benefit for 12 months or less to live	The accident-only window is 12 months; check when the benefit starts
AA Life Funeral Cover (Asteron Life)	Yes, after 24 months	Cover for non-accidental death and terminal illness starts after 24 months
Chubb Life Funeral Cover	None found	Accidental death is covered from the start
Greenwich Life, The Funeral Plan	None found	Premiums stop when the total paid equals the benefit
Kiwibank life cover (nib nz)	$15,000 funeral expenses lump sum	Paid on death or on a terminal diagnosis with death expected within 12 months
Fidelity Life cover (adviser or online application)	Yes, the full sum insured can be accessed early	Fidelity describes this as less than 12 months to live

Sources are each insurer's own pages, read on 17 to 20 October 2026; links are in the references. A "none found" means we found no such benefit in the pages we read, not that the insurer has ruled one out. Read the policy wording before relying on any row.

Why Momentum's Funeral Insurance excludes terminal illness claims

Momentum's wording sets out one trigger for the benefit, the death of the life insured, and says nothing about a diagnosis. The product is built around a fixed, small sum that is paid when the person dies: $3,000 to $30,000, or three times that for accidental death within 90 days of the accident. It is not an income or lump-sum cover for a living person. If you or a family member has been diagnosed, keeping the policy in force does not unlock any money before death.

The 24-month window also matters. Death from illness in the first 24 months pays no benefit, and all premiums paid for that person are refunded. There is no pre-existing-condition clause, so a diagnosis made after the policy starts does not cancel it, as long as premiums are paid (Momentum Life: Funeral Insurance Policy Wording, 17 Aug 2023).

How Quick Life handles terminal illness

Quick Life defines a terminal illness as one that, even with treatment, is expected to lead to death within 12 months. The diagnosis must be confirmed by a medical practitioner that Momentum approves, and Momentum can ask for an independent second opinion at its own cost, and that opinion is final. When a terminal illness benefit is paid, cover for that person ends, so there is no second payment on death (Momentum Life: Quick Life Insurance Policy Wording, November 2025).

Two limits matter most.

The first 2 years. Momentum will not pay a terminal illness benefit within the first 2 years if the illness is directly or indirectly related to a pre-existing condition, or to suicide or intentional self-harm. The wording defines a pre-existing condition as any illness, condition or symptoms in the 2 years before the policy started (or before an increase or reinstatement), including anything the person had treatment or advice for or noticed symptoms of, even if undiagnosed.
Eligibility at application. Momentum's website says Quick Life is not available to applicants diagnosed with a terminal illness or in palliative or hospice care (Momentum Life: Quick Life). That rule is on the website and is not in the policy wording, so check both.

Quick Life also never pays for death or terminal illness caused by alcohol or drug effects, war, terrorism, criminal activity, or a dangerous job or pastime listed in the wording. See the Quick Life page and what guaranteed acceptance means.

What medical evidence a terminal illness claim needs

The detail differs by insurer, but the common pattern is a specialist's report on the diagnosis and prognosis, supporting test results, and, where the insurer asks, an independent second opinion. Quick Life requires confirmation from a practitioner Momentum approves. Fidelity's cover lets you apply to access the full amount early when you have less than a year to live, and it also describes a smaller, earlier payment of 30% of the amount, up to $250,000, in some other cases (Fidelity Life: Life cover). Our terminal illness benefit guide compares the underwritten insurers in more detail.

How to access money if you are diagnosed with a terminal illness

List every policy first. Check any life cover through work, a bank, a KiwiSaver provider or a partner, and read the wording for "terminal illness".
Ask whether an early funeral payment exists. Some life policies pay a funeral sum early; Kiwibank's life cover, for example, includes a $15,000 lump sum on death or on a terminal diagnosis with death expected within 12 months (Kiwibank: Life insurance).
Check the start date. A benefit that begins after a waiting period, such as AA Life's 24 months for non-accidental death and terminal illness, will not help a claim made sooner.
Do not hide the diagnosis. If you apply for any cover that asks health questions, answer them fully. The Insurance & Financial Services Ombudsman Scheme (IFSO) publishes cases where insurers avoided or reduced claims for non-disclosure (IFSO).

What happens to your funeral policy after a terminal diagnosis?

Your policy stays in force if you keep paying. With Momentum's Funeral Insurance, nothing is paid early, premiums continue to the 89th birthday unless the policy is cancelled, and the benefit is paid on death, subject to the 24-month rule. If you cancel, you lose the premiums paid. You can cancel at any time on 30 days' notice. Whether cancelling makes sense is a personal decision that a licensed adviser or your family can help weigh up. For a policy that is already running, our page on funeral insurance waiting periods explains how the first 24 months work.

Finding the right life cover before serious illness develops

Terminal illness cover is a feature of life insurance, and it is easiest to arrange while you are well. People who apply with health questions usually give the insurer a medical history, and it may add conditions or loadings. People who would be declined or heavily loaded may still use guaranteed acceptance, with the 2-year exclusion. Fully underwritten cover through an adviser can offer more cover for healthy applicants. Nobody can promise acceptance, and a diagnosis already made may rule out new cover. A licensed adviser can tell you what is open on your facts. Read the funeral insurance hub and how funeral insurance works for the basics.

Where to get advice

This page does not offer a Momentum application, because Momentum's Funeral Insurance has no terminal illness benefit and Quick Life may not be open to someone already diagnosed. Momentum's A.M. Best rating is B (Fair); see its financial strength page. QuoteHub is a Momentum Life partner and Smiths Insurance & KiwiSaver may receive a commission on Momentum products; see how we are paid. Advice is provided by Craig Smith Business Services Limited, trading as Smiths Insurance & KiwiSaver, a licensed Financial Advice Provider (FSP712931).

Adviser's view

Do not assume a funeral policy pays early. Momentum's Funeral Insurance pays only on death, while some other funeral policies and many life policies include a terminal illness benefit. If a diagnosis has already been made, the choice of new cover is narrow, and a licensed adviser is the sensible first call.

Henry Smith, Financial Adviser (FSP1010699). General information, not personalised financial advice.

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Cite this page QuoteHub NZ (2026). Does Funeral Insurance Pay Out for Terminal Illness NZ?. www.quotehub.co.nz/funeral-insurance/funeral-insurance-terminal-illness-nz. Updated 2026-10-20.

References

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