Funeral policies attract no paid-up value. It is not an investment vehicle. This means that once you stop paying premiums your cover is terminated − no matter how many years you've been paying.
Premiums increase over time, and people's ability to afford higher premiums in the long term can also be problematic, especially when factoring in life stages such as retirement and old age.
A paid-up value is what your life insurance policy is worth after many years of premium payments. It's a cover level you are entitled to from which time any premiums not paid will be deducted from your paid-up value thereby still keeping you covered at lesser and lesser amounts each month − This does not apply to Funeral Policies unfortunately.
Funeral insurance policies on the market can vary significantly, so know the expiry date of the policy, if it expires.
For example, your children's cover on your family policy ceases after they reach a certain age. Once they are of adult age they are no longer covered altogether under the provisions of the policy for children.
Another example is funeral cover until retirement age, through a group scheme. After a person reaches this age, their cover ceases. If they die after retirement age they will not be paid out by the insurer. The onus is on them to seek another funeral policy that covers them till old age.
Know that funeral policies can have some standard features amongst other products, but they all have unique particulars so it is wise to view them in isolation to other products on the market in SA. It is thus important to read all the details of your specific policy.
The Ombudsman for Long Term Insurance mentioned in one of their publications, that they received many complaints about insurers not paying out claims benefits within 48 hours as promised.
The reason for the misunderstanding, they say, is because this promise comes with the condition that … "Claims will be processed within 48 hours (two working days) once we have received all the required documentation."
Do not get the wrong impression that payment will be within 48 hours of notification of death. It is within 24 or 48 hours of receipt of all required documentation stipulated in your policy document, such as death certificate.
Insurance contracts commonly contain clauses requiring claims for the payment of benefits to be made within a given period of the claim arising.
Read your policy document carefully about timelines for making claims after insured death occurred.
The Ombudsman's view is that these clauses are normally enforced which means if you do not put forth a claim within the time specified in your policy then you will lose your benefits.
A policyholder has the right to cancel a policy within 30 days after receipt of the policy documentation. Please notify the service office of the insurer in writing of the cancellation.
Any premium that has been paid (less administration fee) will be refunded and your policy will be cancelled.
Do not be a victim of ignorance. Do your research and be smart about your cover. Know that funeral cover is available through many service providers such as insurance companies, banks, popular retailers, corporate group schemes and community groups such as Funeral Parlours, Burial Societies, Stokvels and other clubs.
The level of information provided to you from each of these stakeholders may not be the same. Make sure you get all the relevant information about your funeral policy and understand the terms.
We all are prone to poor communication. It is important to discuss with your partner the funeral plan, the contact number your partner must call to make a claim, and the procedure to follow. Also, keep your funeral plan in a safe place and tell your partner where it is, so that he/she can find it when making a claim.
Take note that the terms of the contract of insurance should be embodied in a policy, but such a document does not always exist and if it does, it is not always issued to the policyholder.
Sometimes only a certificate or a booklet is issued when a policyholder's application for funeral insurance is accepted.
"In terms of the Long-term Insurance Act, the policyholder should within 60 days of taking out a policy receive a membership certificate summarising the core provisions of the contract and specifying how much of the premium is paid to the insurer and how much to an intermediary or administrator", says the Ombud.
In addition, the policyholder is entitled to insist on a copy of the actual policy containing the full terms of the contract to which he/she had committed to.
It often happens that the details of the insured are incorrectly provided at inception. This is particularly common when the insured is an extended family member, says the Ombud.
The name or date of birth which is recorded may differ from that which appears on the insured's identity document. This becomes a problem when the insured dies and the death certificate does not correspond with the insurer's records. The insurer may then refuse to pay out the claim.
Inspect all your nominated beneficiaries on your policy. Check that all ID numbers are correct and that all full names are spelt correctly as well.
The ombud also suggests that policyholders rather submit a copy of the actual identity document to the insurer at the time of taking out the policy - than just relying on application form details which are prone to generating errors.
Age is a critical factor in determining premiums, so it is absolutely vital to submit the correct age of all insured family members.
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