Accessing VAD - impact on life insurance

As voluntary assisted dying (VAD) has become legal in South Australia, it is likely medical professionals will over time have patients enquiring about the process and implications. While it is not the role of medical professionals to provide advice on life insurance and superannuation, it is important they understand the impact of the legislation on patients and their welfare.

How will choosing VAD affect a patient’s life insurance?

The Voluntary Assisted Dying Act 2021 (SA) (the VAD Act) will not affect a person’s eligibility for life insurance.

Section 228 of the Life Insurance Act 1995 (Cth) provides that:

‘(a) life company may only avoid a life policy on the ground that the person whose life is insured by the policy committed suicide if the policy expressly excludes liability in case of suicide.’

The Life Insurance Act 1995 (Cth) does not provide a definition of suicide. However, section 6 of the VAD Act provides that:

‘for the purposes of the laws of the State, the death of a person by the administration of a voluntary assisted dying substance in accordance with this Act will be taken not to constitute the death by suicide of the person.’

Since VAD is not classified as a suicide, a life insurance company is unable to expressly exclude liability where a person chooses VAD at the end of life.

Is a patient eligible for their superannuation if they choose VAD?

Yes, but subject to any eligibility requirements. The governing rules of a super fund set out when benefits can be paid and who they can be paid to, so the eligibility criteria may differ between super fund providers. A patient should check with their super fund before commencing any VAD procedures.

A superannuation death benefit may be released to a dependant (as defined in the Superannuation Industry (Supervision) Act 1993 (Cth)) or to the trustee of a deceased estate after the superannuation fund member has died. If your patient is thinking of undergoing an end-of-life procedure, they should consider nominating a beneficiary with their super provider.

Nominations can be binding or nonbinding. A binding nomination means the patient can determine who should obtain the superannuation benefit upon their death, subject to the rules of the superannuation fund. A non-binding nomination grants the trustee the discretion to decide to whom the benefit is paid.

Can patients access a terminal illness claim from their superannuation?

If a person is diagnosed with a terminal illness, they can be eligible for ‘early release’ of superannuation. Policies differ among superannuation funds and insurers, but Schedule 1 of the Superannuation Industry (Supervision) Regulations 1994 (Cth) provides that a:

‘terminal medical condition’ will only exist if (among other requirements) two registered medical practitioners have certified, jointly or separately, that the person suffers from illness, or has incurred an injury, that is likely to result in the death of the person within a period that ends not more than 24 months after the date of the certification, and at least one of the registered medical practitioners is a specialist practicing in an area related to the illness or injury suffered by the person.’

The early release of superannuation for reason of a terminal illness is a lump sum benefit that is paid tax-free under the Income Tax Assessment Act 1997 (Cth). A patient wishing to access the VAD scheme should obtain financial advice on whether it is advantageous to have the superannuation paid as a terminal illness benefit as opposed to being paid out after death, which can incur taxes.

How does the VAD Act interact with an advance care directive?

The VAD Act requires the patient to have decision-making capacity throughout the process of approval for treatment. In contrast, the advance care directive will only take effect at the point where the person ceases to have decision-making capacity. As such, a patient is unable to proactively consent to VAD in their advance care directive as it is directly contradictory with the need to have capacity at the time they undergo the VAD treatment.

We highly recommend that medical professionals refer patients with these concerns to financial advisers and accountants where appropriate.

It is important to note that doctors are legally entitled to conscientiously object to supporting access to VAD but are obliged to refer a patient to another doctor willing to provide information.