Four most common reasons life and funeral insurance claims are rejected

According to statistics from the Association for Savings and Investment SA (ASISA), life insurers paid death and funeral benefits totalling close to R40bn, and distributed to beneficiaries of more than 890,000 policies, in 2023.

While that translates to nearly 96% of all claims being successfully paid out, it still leaves about 38,000 claims that were denied, highlighting the importance of understanding the factors that can lead to a claim rejection. 

According to ASISA, the four most common reasons for claim denials are:

1. Fraud and non-disclosure

One of the leading causes of claim denials is fraudulent submissions. Life insurers have increasingly identified claims stemming from criminal activities, some that have even led to high-profile convictions. Also, some claimants fail to disclose material information about pre-existing medical conditions or risky lifestyles, attempting to obtain cover at lower premiums.

2. Policy exclusions

Certain exclusions can lead to unexpected claims not being paid. These range from suicide to excluded pre-existing health conditions or dangerous activities.

3. Waiting periods

Funeral cover often comes with a waiting period of six months, for deaths due to natural causes.

4. Policy lapses

Most insurance policies will not pay out if premiums have not been maintained. ASISA reports that this is particularly common with credit life policies. If a loan is defaulted on, and premiums are unpaid, the insurer is not obligated to pay a claim. 

How to improve your chances of a successful claim payout

John Manyike, head of financial education at Old Mutual, has put together a list of five tips that will help make the claims process easier and improve your chances of securing a payout:

1. Full disclosure

Always provide accurate and complete information about your health and lifestyle when applying for insurance. A simple thing like incorrect date of birth or names could result in additional verification processes and this is what delays a lot of claims as insurers need to diligently assess claims to rule out fraud. This inconveniences clients, but it can be avoided if accurate information is provided in the initial stages when a policy is taken.

2. Understand your policy

Take the time to read your policy documents thoroughly. Be aware of any exclusions, waiting periods, and conditions that might affect your coverage.

3. Regular reviews

Review your insurance coverage at least annually with your financial adviser to ensure it meets your needs, especially after significant life changes.

4. Communicate with your insurer

If you are unsure about your coverage or have questions, reach out to your financial adviser or broker for clarification.

5. Be cautious with policy switching

If your coverage changes (such as moving from life cover to accidental cover), ensure you understand the implications. Complete all required medical underwriting and be aware of how any negative results might affect your policy.

While the vast majority of life and funeral insurance claims are honoured, being proactive can greatly improve the likelihood of your claim being paid. By understanding your obligations and working with your insurer or broker, you can help safeguard your beneficiaries’ financial future.

For more tips on how to successfully claim from your insurer, visit the Old Mutual website.

This article was sponsored by Old Mutual.