The last thing anyone wants to hear from their insurer is that payment of a claim or pay out of a policy is going to be withheld. While you might respond with umbrage and indignation, it’s a good idea to make sure that your side of the agreement is actually fit and proper for your claim, and that you have acted responsibly in setting up your life insurance policy.
There are several reasons why an insurer may not honour a life insurance policy, and most of these aspects lie on your side of the bargain. That’s why it’s important to read the small print of your policy, ask questions and make sure you understand the finer points, because if a dispute arises over the pay out, you could well be on the wrong side of the agreement. The fine print is where exclusions are disclosed regarding specific circumstances that would not allow the beneficiary to receive the payment on the policy if you die. Never assume that pay-out is guaranteed no matter what.
The most common reason why a policy may not be paid out is because you have not provided the full and correct information when setting up the policy. If you have knowledge aforehand of a medical condition such as cancer or heart issues, and you don’t disclose this when applying for your policy, then the insurer can reject the life claim or only pay a much reduced amount of money. Lifestyle aspects such as smoking, drinking, unhealthy weight issues – anything that is not honestly stated upfront, can affect the payment of a claim.
Understanding this is key. For instance, if you don’t disclose that you are or have been, a smoker, and you die of heart disease, then the insurer can refuse payment due to the fact this detrimental aspect of your lifestyle was never mentioned. Likewise if you die in a vehicle accident, and it’s shown that you suffered from high blood pressure, the insurer could counter-claim by saying that simply because you avoided full disclosure about your health, they are not going to honour payment on the accidental death.
Letting your premiums lapse
Your policy is a legal contract and you are expected to pay your premium regularly. If you stop paying for whatever reason such as forgetfulness or financial constraints, the contract can be suspended and ultimately terminated. Either way, claims will not be met. To be safe, set up a monthly debit order, and always keep in contact with your insurer and ensure that you are updated of changes, and that you update them on any matter that may affect your ability to pay your premiums.
Updating your provider with life changes
Your responsibility with regard to yourself is important. If you are engaging in dangerous sports, or you develop a life-threatening disease, or you have had an accident and are no longer able to work, you must inform your insurance company. Life is a risk in general, so make sure you take care, and if there are any added risks or changes to your lifestyle, you must discuss the implications with your insurer or financial planner. Be honest about your risky hobbies or activities, even if it means higher premiums. If you don’t, you might get the Darwin Award but you’ll get nothing from your life insurer.
The view on suicide
This can be a complicated issue and certainly can complicate life insurance pay-outs. Most companies protect themselves from this claim through a 2-year non-payment timespan. You will have to investigate your company’s stance on the issue. If suicide is committed within a certain time frame, then your beneficiary may only receive the premiums back but not the full death benefit.
Suicide is an incontestability clause, a window of time during which the insurance company can investigate and deny claims. But after the designated non-payment period, many policies will pay out. Intent with regard to suicide is sometimes a complicated legal issue between suicide and accidental death, and it can cost the company more to argue the case than to pay out, but these are not easy fights with any insurer.
Act of War/ travelling/ living in another country
This exclusion is in place to deny claims from people who have placed themselves in dangerous situations, and have died as a result – such as soldiers, journalists, or people who have entered a war zone for any reason. Any exceptional level of danger that raises the risk of death, means that a standard life policy will not pay out.
Likewise with travelling – insurers break the world up into risk zones. Any destination that raises the stakes of being attacked or kidnapped or murdered, or even high disease risk, raises the stakes on unlikely pay-outs. If you have a life policy in one country, but live in another for either lifestyle or work reasons, your insurance company is unlikely to pay-out, unless you have arranged the policy to incorporate the potential aspect that you might die elsewhere.
Important missing documents
Always ensure you keep all important documents to hand, so that in the event of your death, your family has the required paperwork to process a claim. The original policy paper is crucial, plus the coroner’s report, plus death certificates. This can be particularly onerous if your death has taken place in a foreign country. Regardless of whether the country where your death has taken place has similar legal and documentation systems to the country where your policy originated, claimants will need to present both an original death certificate and a certified translation of all the related paperwork. A delay in obtaining these documents will delay payment of claims.
Check your policies, check your life
Verifi is an online tool that provides you with an immediate and up-to-date overview of all your life insurance and investment policies by sourcing information from all the major life insurance companies – and presenting the information in a comprehensive report.
With Verifi you are able, for no charge, to access information on all your life and investment policies at a glance. You are able to check the types of policies you have, the names of the insurance companies providing the cover, the nature and extent of the insurance cover provided – and other vitally important information such as the details on your policies being correct.
To find out more, please visit: www.verifi.co.za