Are you sure you know what the "insurance speak" in your policy means?
You might be in for a shock if there is a delay in or forfeit of a claim pay out of your insurance policy and it turns out you misunderstood the terms used.
Do you know what words like "repudiate"; "annuitise"; "paid-up benefit"; "surrender"; and "lapse" mean in an insurance context? From a legal point of view, these terms are necessary. Just as necessary is to be sure you as a policy holder knows what they mean.
In order to make the public more aware of the meaning of typical - and very important - insurance jargon usually involved in the insurance process and when claiming, Metropolitan has recently launched its #WordsMatter campaign.
It forms part of a larger campaign aimed at helping consumers understand insurance jargon and making the insurance claims process more understandable.
Llewellyn Allen, Metropolitan's head of marketing, says various regulations require insurers to explain things "simply" or "in plain language".
In order to make their documents as simple as possible, Metropolitan, for instance, also use diagrams and pictures to illustrate concepts to assist clients with understanding.
Fin24 recently took part in a round table discussion hosted by Metropolitan as part of the #WordsMatter campaign. The discussion was aimed at finding easier words to describe some important insurance terms.
"We are trying to get away from using 'big words' to make sure clients understand what we mean. If we and our clients don't understand the promise we are making, then both will (sides) will not be happy," Metropolitan company actuary Mareli Mans said during the discussion.
Do you know what these insurance concepts mean?
A "lapse" of an insurance policy is basically a temporary suspension, unlike a cancellation that is a final movement. A "lapse" happens automatically after a certain number of premium payments are missed.
In other words, it refers to a "lapse in insurance coverage". If the contract had a life insurance component to it too, this would also "lapse" at the same time.
"It is the worst thing when someone puts in a claim only to find out the policy had lapsed," said Mans.
Deidre Wolmarans, Head: Life Events Solutions at MMI Holdings, added that, because a lapse is usually temporary in nature, the policy can usually be reinstated within a limited amount of time if, for example, the outstanding premium payments are brought up to date.
Surrendering an insurance policy is normally done by the owner when he/she wants to withdraw all funds in the policy due to a financial need or he/she does not want to continue with the policy any longer. The policy will cease to exist after the surrender payment.
It can also refer to a partial cancellation – like a withdrawal and typically involves the payment of some kind of penalty if it is done ahead of time.
This is where you convert a lump sum invested into the payment of a regular stream of income over a certain period, like a pension or annuity.
Wolmarans says it is important to understand the various options available when making a decision in this regard.
Paid up benefits
This relates to a life insurance policy where the end of the premium paying term has been reached in other words no more premiums payable. The insured is then free of all payment obligations. This is normally a benefit that kicks in at retirement age or at disability.
The policy then stays intact with cover for all the insured lives until death. A paid-up benefit can also be applicable at the death of the owner or insured life of a policy which means that the policy will continue without premium contributions for the remaining insured lives on the policy after the death of the owner or insured life.
This is the obligation of the person taking out an insurance policy to reveal the truth about his or her situation, sharing all the information the insurer requires up front to ensure that a reasonable risk assessment is possible – like an open book.
This could include information about your medical history, for instance.
Repudiation is a breach of the terms or conditions of the insurance agreement that justifies a particular claim to be denied. In other words, the insurer can deny being liable to pay in this instance.
Claimant vs beneficiary
The beneficiary is the person nominated by the owner/ life insured of an insurance policy who would be entitled to the claim amount upon the death of the owner/life insured.
A claimant, on the other hand, can be anybody who puts in the claim. For example, it can be the employer of the policy holder who died, or the undertaker.
This is when you do not qualify to receive a payment in terms of a particular claim due to not having met certain terms, conditions or criteria.