Make sure your life policy covers more than accidents

It may be worth checking any cover you already have in place to ensure it meets your expectations and will pay out a benefit whether you or your family members die from an illness or an accident.
It may be worth checking any cover you already have in place to ensure it meets your expectations and will pay out a benefit whether you or your family members die from an illness or an accident.

Be warned: life assurers selling funeral and life cover that appears to offer full cover may, if you don't meet the medical criteria, reduce your benefit to one that pays out only if you die in an accident.

You may not realise it because life assurers have not been good about informing you or reducing your premiums when your cover reduces.

After receiving numerous complaints, however, the life assurance ombudsman reported the matter to the Financial Services Board.

As a result, life assurers are making a greater effort to inform you, the policyholder, the ombudsman says.

But it may be worth checking any cover you already have in place to ensure it meets your expectations and will pay out a benefit whether you or your family members die from an illness or an accident.

Judge Ron McLaren, the Ombudsman for Long-Term Insurance, says the fact that some assurers do not reduce your premium when the benefit to which you think you are entitled is reduced, is unfair.

You should not pay the same premium for a benefit that pays out on death from illness or accident as you would for cover that only pays out in the event of an accident.

Despite the high incidence of accidents in South Africa, especially motor vehicle accidents, life assurers' statistics show that you are more likely to die from illness than from an accident.

Liberty Life's latest claims statistics for 2017 show that accidents only qualify as one of the top five causes of claims for young adults - in all other age groups illnesses such as cancer, heart attacks and strokes are the leading cause of life and disability claims.

McLaren says some insurers advertise cover for people with illnesses such as HIV or diabetes, but if you or the family member you are insuring fail to meet the medical criteria, your policy may not cover death from an illness.

The ombudsman's office says these policies are sold by direct life assurers and there is often a long phone conversation when you take out the policy.

In that conversation, you may easily miss the point that if you fail to have the medical test within a certain period, or if you do not meet the medical criteria, default cover for accidents only will apply.

McLaren says the fact that your premiums do not reduce can compound your confusion about the cover.

While the life assurers may have improved their practices lately, McLaren says you might not realise that you have a policy you bought in the past on which cover may have been restricted to accidental cover only. If you are not sure, check with your life assurer.

Jennifer Preiss, the deputy ombud, says if you want to know what your premiums should be if your cover has been reduced to accidental cover only, you should ask an assurer or a short-term insurer that offers accident cover only for a quote.

She says the ombudsman will investigate if you as a policyholder, or the family of a policyholder, have discovered after the insured dies of an illness that the cover had been reduced to accident cover only.

If the ombudsman finds that you were sold a policy without being given all the information you needed to make an informed decision, the matter can be referred to the ombud who deals with financial advice, the Ombud for Financial Services Providers.

Alternatively, the life assurance ombudsman may award you the difference between the full premium and a reduced premium or a refund of all premiums less costs. Preiss says the ombudsman can also ask assurers to award you compensation for poor service.

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