Funeral insurance is the most popular financial product in South Africa.
In a time where money is tight and even the smallest monthly premiums make a difference, it is imperative to know what you are paying for, if it is what you and your family need, and most importantly, to ensure that everything is legit.
How do funeral policies work?
As the policyholder, you will pay a monthly amount (known as a premium) so that in the event of death, a specified amount (known as your cover) is paid out to your family.
The lump sum helps pay for funeral costs, so that loved ones do not have to deal with the burden of a lack of money in this difficult time.
Though there are many legitimate insurers who will pay out when you need them to, there are funeral scams where people pay monthly premiums only to be disappointed when the time comes to claim.
Often policies are fraudulent and not underwritten by an insurer or the cover isn’t with a registered insurer.
The Financial Services Conduct Authority (FSCA), who regulate financial services in South Africa, pointed out three of the most common funeral policy scams to look out for:
- Unauthorised business selling funeral policies:
In this case, the business or provider selling the funeral policy is not authorised by the FSCA to sell policies.
So always check that a company has full FSCA authorisation to sell you a policy before you hand over any personal details or money.
- Unauthorised representatives selling funeral policies:
The person selling the policy claims to be, but is not, a representative of a legitimate, well-known insurer or other financial company.
If you are unsure, always call the company they claim to represent and check if they are part of a legitimate company and have the right knowledge and skills to assist you.
- When a funeral policy is not underwritten by a long-term insurer:
This is important, because long-term insurers are required to have enough funds to make sure they can settle claims, making sure that your claim can, and will be, paid when the time comes.
There are always scams and illegal operators around.
It is important that you deal with trustworthy organisations.
Take your time and do not rush into a decision to buy a policy.
The Ombudsman for Long–term Insurance has also posted general guidelines to follow when buying funeral cover:
- If you are buying a funeral policy from a salesperson, always make sure that the person has a licence from the Financial Services Board (FSB) to sell insurance. Ask the person to show you their licence.
- Make sure that you know who the insurer is. Funeral policies are often administered and sold by third party funeral administrators. It is important to know who the insurer is who underwrites the risk.
If there is an application form, fill it in yourself. Make sure you read everything on the form including the fine print above your signature.
If there are any questions or declarations about your own or any other life assured’s health, make sure that you disclose all the important information. When you claim and the insurer finds out that you did not disclose material information on the form it could cancel the policy and not pay the claim.
You must be sent a policy or a policy summary when your application is accepted. Insist on seeing the document. Read it and make sure you understand it. If not, phone and find out what it means.
You have a 30-day “cooling-off” period after you receive the policy or summary to cancel the policy if you are not satisfied.
Make sure that your premiums are paid every month on time. It is your responsibility, even if you are paying by debit order or stop order. Keep proof of payment. If the premium is not paid the policy may be terminated and a claim may be refused. There is a grace period (15 days or longer depending on the policy) after the due date when cover continues, but after that no benefits will be paid.
If you have any dealings with a salesperson, the administrator or the insurer, keep written proof of the dealings.
Make sure that any beneficiary nominations (where you nominate the name of the person who must receive the benefits on your death policy) are up to date and still reflect your wishes.
When a life assured (the person covered by the policy) dies, the claimant must submit the claim as soon as possible. Check in the policy how much time there is for a claim. If the claim is late, the insurer can refuse to pay the claim.
If a claim is refused for any reason the insurer or administrator must give you their reasons in writing.
The Ombudsman for Long-term Insurance resolves disputes between subscribing insurers and policyholders. If you are not able to resolve a complaint with an insurer then you can contact them on [email protected] or call 021 657 7000.
It can be extremely traumatic when a loved one has passed and suddenly the funeral you have been planning for, cannot become a reality, even though the policy was paid for many years.
Make sure to see that all your funeral premiums are up to date and that your funeral cover is in order before you leave your loved ones with this headache upon your death.