A financial planner may be cheaper in the long run

It is a sobering thought that a death claim lodged in terms of a life assurance policy taken out "the easy way", might be repudiated. Could such a situation really arise and how?

It is a sobering thought that a death claim lodged in terms of a life assurance policy taken out "the easy way", might be repudiated. Could such a situation really arise and how?

The sad truth is, yes, it certainly could and it wouldn't be the first time.

In my experience Life Assurance product providers who underwrite very carefully and ask the most questions at the contract application stage, the ones who almost drive both the applicant and the broker dilly with all their underwriting requirements, are the ones who most reliably honour claims.

Underwriting is the process according to which the Life Office assesses the risk on the life to be assured before they offer terms. The better your mental and physical health, the better the terms you will beoffered.

Did the short list of questions about your health seem easy to say no to because you felt there was nothing untoward about your health? You could quite innocently forget about a past ailment that you might not have thought was serious, yet insurance companies might take a different view.

Do you know that some companies will allow limited underwriting in order to speed up their take-on of new business, safe in the knowledge that full underwriting at claim stage could permit them to repudiate the claim if needs be? The reason for the repudiation will be stated as "non-disclosure" of material facts affecting the risk.

In some cases there may be other complex issues that will take a long time to sort out. This will impact heavily on beneficiaries who may have to wait many months before they are paid out.

What I do want to caution you about is that while you might understand that contracts are contracts, you must also understand that, particularly with risk cover products, the contract issued will be based strictly on the material facts you disclosed during application.

If you found it frustrating to cope with all the questions while your financial consultant was sitting with you, because he kept elaborating on pertinent factors relating to the medical questionnaire, understand that he was being thorough. He was protecting your interests.

Now how do you feel about allowing a call centre operator to quickly handle critically important questions over the phone during a sale lasting only a few minutes? Were all the right questions actually asked or have you inadvertently exposed your heirs to possible delays caused by underwriting at claims stage? Will the claim ever be paid?

A phone or a mouse can never replace face-to-face interviews when it comes to situations affecting your family's existence. Not using a financial planner might save you commission, but in the long run it might cost your dependents a lot more.

l The writer is a director of Pioneer Financial Planning. Visit www.pioneer.co.za or e-mail help@pioneer.co.za

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