Know your life policy’s limits

2018-06-20 06:02

PEOPLE take out life insurance to protect their families from financial hardship when it matters the most — usually at the time when a loved one passes away.

However, despite the policyholder’s best intentions, it is possible that a life insurance claim can be rejected. To protect yourself against such actions it is important to understand the reasons why claims might be rejected.

“Life insurers depend on their good reputation in the market to keep attracting and serving new customers, so we always want to settle claims for families,” says Sonja Visser, the CEO of African Unity Life.

“However, insurance companies have rules in place to make sure that all policyholders are fairly covered, treated with consistency and covered at a reasonable price, and breaking the rules can mean that your claim will be declined.”

For this reason, she says, it is vital that you understand the rules and requirements of your policy. The most common reasons that claims are rejected are explained below.

• The person who passed away was still within a waiting period — Most funeral policies have a waiting period before the policyholder or their family can claim. This is to stop people from only taking out insurance when they have a life-threatening condition.

If the policyholder or other insured family member passes away within the waiting period, they will not be covered.

• There were exclusions in place —Some insurers will exclude certain pre-existing conditions from the cover that they offer. Exclusions might be in place permanently or for a period of time.

So, for instance, a policyholder with diabetes or a heart problem might be excluded from cover for death as a result of these conditions. However, should they pass away in an accident or unrelated illness, their claim will be paid out. Exclusions will be noted in the policy’s terms and conditions. Make sure you read and understand these before you take out any insurance.

• The policyholder withheld information from the insurer — When you take out your life insurance policy, don’t try to make yourself sound healthier than you are. You might smoke or take drugs, or you might have a pre-existing condition or engage in a dangerous sport. Disclosing these things does not mean that you will be denied cover but withholding the information could mean that your claim is denied if you die as the result of one of these activities.

• Your premiums aren’t up to date —If, at the time of passing away, your premiums aren’t up to date, your life insurer may reject your claim, subject to the insurer complying with legislative prescribed cancellation procedures. By law, insurers have to give their customers a grace period, usually a month. Generally, if you don’t pay after 60 days, your policy will lapse, however, it is the duty of the insurer to notify you of this.

They cannot allow the policy to lapse without having let you know in advance.

It is vitally important for you to keep up your premium payments but, if you are struggling, it is worth discussing this with your insurer.

“We understand that our customers don’t always have regular income. So, in many cases, we will offer to reinstate a lapsed policy once the outstanding amount has been paid - without any waiting period,” said Visser.

The good news is that, in almost all cases, South African life insurers do pay out.

According to the Association for Savings and Investment South Africa (ASISA), life insurance companies paid out close to 99% of claims in 2015.

Death benefit claims statistics submitted by 12 long-term insurance companies showed that 35 983 claims were honoured while just 396 were declined.

“This just goes to show that life insurers really are there to honour their commitments to clients,” said Visser.

“Be honest, abide by the rules and keep your policy up to date and then rest assured that your family will be taken care of in their time of need.”

— Supplied

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