Mistakes that could invalidate your funeral cover
When it comes to choosing the right funeral cover for your family’s needs, it is vital to look at the T’s & C’s when comparing quotes. By doing so, you will reduce the risk of making a mistake that could potentially invalidate your policy. In South Africa, between 50% and 60% of complaints relating to funeral plans put before the Long-Term Insurance Ombudsman are about unpaid claims due to the conditions of the policy not being met.
Here are six common mistakes to be aware of so that you are empowered to make an informed decision before buying a funeral policy.
1. Not doing your homework when choosing a service provider
▶︎ Do not simply opt for a service provider because it belongs to a big brand.
This does not mean they’ll give you the best cover for your unique needs. Funeral policies are often administered and sold by third-party funeral administrators. So, before buying a policy, you should make sure that the service provider issuing it is registered with the Financial Sector Conduct Authority.
The company selling you the policy should also be able to provide you with a Certificate of Assurance or a Certificate of Membership.
2. Taking out too many funeral policies
In South Africa, it is common practice for breadwinners to not just cover their immediate family but their extended families too.
▶︎ Nearly 19 million adults in the country are covered by a funeral plan, while over 40% of adult South Africans are covered by two or more funeral policies.
In fear of losing money already spent on premiums, people tend to hold onto earlier policies when taking out new cover. This is because they tend to misunderstand the “cash-back” component of funeral cover and mistake their policy for a savings product.
There is currently no limit to the number of funeral policies someone can have in South Africa. When a new product comes on the market, individuals often don’t cancel their existing policies for fear of 'losing out' on the cash back opportunity. Where, in reality, they usually land up paying for that cash-back benefit through the higher monthly premium.
Unfortunately, there is a risk of over-insuring family members – and wasting money – if there are too many policies in place. This is because some covers won't insure one person for more than a set amount and there are other insurers that will only pay out on a certain number of policies on a particular person's life.
For example, if you and your two siblings each buy funeral cover for your father from the same service provider, when he dies the insurer may pay out only two of the three policies, or may pay out a limited amount.
3. Misrepresenting information on the application form
Failing to provide accurate information or withholding relevant details on the application form will very likely invalidate a claim.
▶︎ Make sure you declare any pre-existing medical conditions you or the insured person may have.
You should also ensure that the beneficiary of the policy knows about its existence, who the policy is lodged with and have access to all the necessary documents in order to provide complete and accurate information at the claims stage.
A claim cannot be made if the death has not yet been registered at the nearest Home Affairs office or at a funeral home. In addition, the beneficiary will need to submit all the necessary documents (certified copy of death certificate, copies of ID or passport for the deceased and beneficiary, bank details of beneficiary).
4. Not reading the fine print on waiting periods and exclusions
▶︎ Funeral cover normally comes with waiting periods.
Although these vary, they are usually between three months and a year for death resulting from natural causes; and up to 24 months for death resulting from suicide. Only when the applicable waiting period ends, will your policy be paid out. There are no waiting periods when it comes to the pay-out for a death caused by an accident – you will be fully covered from your first premium payment.
Your funeral policy will also have certain “exclusions”.
These are the conditions under which your policy will not pay a benefit.
⇢ For example, your contract may specify that if you commit a crime that results in the death of a family member covered by the policy, the benefit will not be paid. Your policy may also exclude cover for pre-existing conditions, such as heart disease.
Make sure you and your family members are aware of any exclusions that may apply to your policy, because your policy will never pay for events that are listed.
5. Misunderstanding the true cost of your premium
▶︎ Funeral cover premiums can rise drastically over time, so try to gain a good understanding of any potential changes and hikes from the start of your premium.
It’s also sensible to compare three or four policies before choosing the one best suited to you and your family circumstances. It is crucial to not only compare the starting premium you’re quoted for funeral cover, but to also find out how policies will differ in terms of premium payments over the long term.
Two service providers may initially offer you the same cover and the same premium, but one of them could increase their premiums by 15% annually, while the other only does so at 5%. Some policies' premiums increase at higher rates each year as you get older, so premiums may start low but have extremely high annual increases.
When it comes to premiums, don’t be shy to ask how the insurer’s annual premium and cover increases work, and what happens if you miss a payment.
6. Don’t be tempted to skip premium payments
Once you’ve taken out funeral cover, be disciplined about making your monthly premium payments.
▶︎ If you fall behind on these, or only pay a portion, this may invalidate your policy.
If a policy lapses, it will have to be reissued and the underwriting process will need to be started all over again. This could affect the cost of the premium going forward. The policyholder may also be subject to waiting periods before cover actually starts.
Ensure that you can comfortably afford the monthly premium before you invest in a policy. Rather choose a comfortable amount of funeral cover than a premium that you will struggle to pay. Skipping premiums can lead to lapsed policies, meaning everything you’ve already paid up to that point will be for nothing.
With funeral cover, the devil is always in the detail. There may be important information in the fine print, especially if you are not dealing with a reputable and ethical service provider. With Meerkat you can plan for the funeral you want and ensure your family has peace of mind.
Once you have clarity on your requirements, simply get an easy online quote and purchase your policy online. Our funeral cover is underwritten by Old Mutual Alternative Risk Transfer Limited, part of the Old Mutual Group. They have been paying claims for over 170 years, so you can rest assured you are in safe hands.
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