If you are financially responsible for a large family, then you can benefit from buying a funeral insurance policy that offers a quick pay-out when you or a member of your family passes. The cash cover offered by a funeral policy can be used to pay for a wide range of funeral expenses and ensure a dignified ceremony for your loved ones, without causing financial hardship.
The latest industry statistics show that there are more than 11 million individual funeral policies ‘active’ in South Africa today. These policies, which serve as a financial lifeline to policy holders and their families alike, are often sold via call centres or face-to-face by an agent at a funeral parlour.
Given the limited financial advice offered during these sales interactions, you might be wondering how well the average policyholders understand their funeral policy. More importantly, what should you know before setting out to buy a funeral policy?
The Financial Intermediaries Association of Southern Africa (FIA) would love to see a South Africa where all consumers have access to independent financial advice when buying a financial product. But we appreciate that for funeral policies it is more likely you will be guided by a sales agent. The following five facts will help you to make an informed discussion about this important type of cover and prevent disappointment when you have to claim against the policy.
1. Basics of a funeral policy
You can think of a funeral policy as an entry point to insurance. It is a simple type of life insurance cover that makes a lump-sum pay-out if one of the people insured on the policy passes away. The pay-out can be used to cover the funeral expenses of the deceased including the cost of a coffin, grave site, hearse and undertaker’s fees, to name a few. The maximum pay-out on a funeral policy is limited by law to R100000.
2. Buy from a reputable financial services provider
You must be on the lookout for scams, unlicensed firms and illegitimate funeral businesses trying to sell you a dodgy policy. The Financial Sector Conduct Authority (FSCA) says that you should always ensure that your funeral policy is underwritten by a credible, reliable, licensed insurance provider. Before buying funeral cover, you should make sure that the broker, funeral parlour or insurer is registered with the FSCA and check that the agent or broker you are dealing with is authorised to sell this type of insurance.
3. Information that you must supply when you buy the policy
The insurer will require a great deal of personal information when you buy a funeral policy. You must make sure that you understand what information they are asking for and give accurate information at all times. For example, you will have to provide a list of the family members you wish to insure on the policy (the insured lives) and the persons who will receive the cash when the policy pays out (the beneficiaries).
Most funeral policies allow you to add your children, parents, grandparents, siblings and aunts and uncles to the policy in return for an additional premium; but you cannot add a friend who you call ‘aunty’ or ‘uncle’. You should clear up any doubts about the lives you can add to the policy when you buy it, because it will be too late to do so at claims stage. Another common problem is to give incorrect ages on the policy form, so you should take extra care to get this right.
4. Know the rules that apply to your policy
You should pay close attention to the rules that apply to your funeral policy because if you ignore these rules your insurer may reject your claims. More than two thirds of all funeral policy claim rejections are due to the insured not understanding the waiting period rule.
A waiting period is the number of months for which you must pay premiums before you can claim against the funeral policy. Your insurer cannot have a waiting period longer than six months and may not apply a waiting period for accidental death of a life assured. Another of the conditions of cover is that you pay your monthly premium on time. You should, therefore, ask the agent or insurer about the rules that apply if you miss a premium payment.
5. Provide the documents to support your claim
Most funeral policies will make a pay-out within 48-hours of the death; but you have to provide the insurer with the necessary documentation, or there can be delays. You will have to lodge a claim with the insurer and provide proof of death of the deceased family member as well as any other documents that the insurer requests. If the death is under investigation, it will take longer for the claim to be finalised.
The good news is that there are insurance laws to protect you from unfair treatment. Insurers, insurance brokers and other financial services providers must comply with all insurance regulation and apply six Treating Customers Fairly (TCF) principles when they deal with you. If you run into problems with your funeral policy, then you should first try and resolve these with the insurer. If that fails, you can approach the long-term insurance ombudsman for help at www.ombud.co.za.