The insurance industry needs to do what it can to ensure that funeral plans are exactly what they should be – safe and reliable.
News that the Financial Services Board (FSB) is probing 13 funeral schemes, highlights the need to make sure that consumers pick the right product and insurance services provider. According to the FSB, the schemes under investigation did not confirm before its deadline that their policies are underwritten by a registered long-term insurance company. This is in breach of the Long-Term Insurance Act, and seen as running an unregistered insurance business.
For many South Africans, choosing a funeral policy is the first experience they have with insurance products.
A positive experience with funeral schemes can encourage consumer confidence in the insurance industry. It is potentially disastrous if the policyholder may find out at some stage that there is no financial or institutional support to pay out claims to beneficiaries of the insured”.
Acquiring a funeral policy is the first step people take to ensure that they and their families can afford a dignified funeral.
Choosing the right funeral policy can prove a challenge as there are many options and providers – and not all of them are reliable. It is crucial that consumers are sure that the policy they purchase, is with a registered and trustworthy service provider.
When choosing a policy, consumers need to carefully consider their family’s needs. The chosen cover should include the appropriate range of benefits required, such as the required casket, transport services for family and friends to the funeral, a grocery benefit (to support the family for a short while), airtime to contact relatives and friends, and even – in some cases – education fees for the children of a deceased breadwinner. Benefits will vary according to the funeral plan and level of cover chosen.
It is important to note that there are no medical examinations when taking out a funeral policy. However, there is usually a waiting period; generally of about six months.
It is of utmost importance to confirm that the person who is selling the policy has a license from the FSB (or works with an FSP), which must be presented upon request. Additionally, funeral policies are often administered and sold by third party funeral administrators; so it is important to know who the insurer is that underwrites the risk.
African Unity Life proposes the following checklist when taking out a funeral policy:
- Confirm the details of the intermediary and their relationship with the insurer. Intermediaries must be mandated by insurers to sell their products.
- Always complete a policy proposal form yourself.
- Give complete and accurate information. If in doubt, disclose information.
- Always read any document thoroughly before signing it.
- You have a 30-day grace period to cancel a policy or make amendments – enquire about the cooling-off period.
- Make sure the policy contract matches what you understood it should be.
- Check the terms and conditions, benefits, premiums and exclusions.
- Ask what the implications are of replacing one policy with another.
- Keep written proof of your correspondence and dealings with the insurer and intermediary.
Once a policy is in place, there are still a few things to be aware of regarding the actual claims process:
- Most insurers will pay out within 48 hours if the correct documentation is submitted. You will need a death certificate, proof of banking and the applicable claim forms.
- Remember, the insurer cannot stipulate what the claim payout is used for.
- You do not get any money out if you cancel the policy. It is a pure risk insurance product, which means that the premium you are paying is being used to cover the risk of your passing away. The moment you cancel the policy or it lapses (if premiums are not paid) your cover will be forfeited and no claim will be paid.
- Ask for written explanation for repudiation or non-payment of claims.
- An insurer must always advise the holder of a policy when the policy is being cancelled.
Sonja Visser is CEO of African Unity Life