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Don’t let criminals steal your funeral cover

22 August 2017 Brad Frank, ASISA
Brad Frank, Senior Policy Advisor at ASISA

Brad Frank, Senior Policy Advisor at ASISA

Funeral insurance products are meant to pay out quickly and without hassle when you or an insured family member dies. However, unless you bought a legal funeral policy issued by a life insurance company registered with the Financial Services Board (FSB), you have no guarantee that your funeral policy will pay out.

It is the job of the FSB to investigate and take action against companies or individuals that sell funeral policies not underwritten by a registered life insurance company. The FSB recently announced that it was investigating 13 companies for selling illegal funeral policies.

Brad Frank, Senior Policy Advisor at the Association for Savings and Investment South Africa (ASISA), says you can protect yourself from dishonest people selling illegal policies by asking the right questions and checking your policy documents.

Frank suggests asking the following questions when you buy funeral cover:

1. Is the company that is issuing the policy registered?

Whether a financial adviser or a funeral parlour sells you the funeral policy, ask for the marketing material from the life insurance company that explains how the policy works. If you do not recognise the company’s name, you can e-mail the FSB at info@fsb.co.za or call 0800 20 20 87 to check that the company is registered by the FSB. You can also visit the FSB’s list of registered insurers on their website.

If you decide to buy the policy, make sure that same life insurance company’s name and registration number appears on your policy contract.

2. Will I receive a Certificate of Assurance or a Certificate of Membership?

As proof that you have bought a funeral policy, you must receive a Certificate of Assurance within 60 days. This certificate confirms that you have funeral cover in place. Once you have received this certificate, you should phone the insurance company to check that the certificate is valid. You also have the right to ask for a copy of the policy contract.

If, however, you receive a Membership Certificate from a funeral parlour, you know that you have not bought a funeral policy, but a funeral parlour membership. If you sign up with a funeral parlour as a member, you and your family will receive a funeral services benefit in return for monthly membership fees. A funeral parlour membership usually does not pay a cash benefit.

3. Where is my proof of payment?

If you pay for your premiums in cash, ask for a receipt after every payment and keep these receipts as proof. The name of the life insurance company that issued your Certificate of Assurance must appear on the receipt, together with a reference to your policy number.

If you can, avoid paying premiums in cash and remember that registered insurance companies will never insist on cash payments.

Choosing the right funeral policy

Frank explains that not all funeral policy benefits are the same. The benefits offered by different funeral policies may vary and your needs should determine which one is best for you and your family. Frank recommends the following checklist to help you choose a suitable product:

What type of cover do you need? Some funeral policies will pay a cash benefit, others will pay for the funeral service up to a specified value, and some may offer a combination of cash and services. Therefore, when buying a funeral policy make sure you are getting the type of policy that will best meet the needs of your family. If you want your family to be able to pay for your funeral and settle some debts, a cash benefit could be better. But if you know your beneficiaries are not very responsible when it comes to money, opting for a funeral service may be the wiser option.

If you opt for a cash benefit, carefully consider the amount. The higher the amount the higher your monthly premiums.

Who does the policy cover? Some policies will cover a specific number of people, while others may only cover immediate family such as your spouse or life partner and children. If you want cover for your adult children or extended family, you may need to pay extra. Remember all insured family members must be listed on your policy document to be covered.

Can I expect a waiting period? When you buy funeral cover you are not required to go for blood tests and medical examinations. This makes it tempting for some people to buy funeral cover only once they have developed a serious illness and are expecting to die as a result. To prevent this, funeral cover usually comes with the following waiting periods, which varies depending on the life insurer:

o Between three and 12 months for death as a result of natural causes;
o Up to 24 months for suicide.

No waiting periods apply to deaths caused by accidents and you are covered from your first premium payment.

Once the waiting periods that apply to your policy are over, your policy will pay should you or anyone else covered under your policy die in an accident, from an illness, due to natural causes and even due to suicide.

Are there exclusions? Your funeral policy is likely to come with exclusions, which are conditions under which your policy will not pay a benefit. Your policy contract may, for example, state that if you commit a crime that results in the death of a family member covered by the policy, no benefit will be paid. This is an exclusion. Make sure you and your family members are aware of any exclusions that may apply to your policy.

Frank says that waiting periods and exclusions are often misunderstood, resulting in many complaints to the Ombudsman for Long-term Insurance. He adds that it is therefore so important that you and all your family members understand the difference between a waiting period and an exclusion. Once the waiting period that applies to your policy ends, your policy will pay. However, your policy will never pay for events that were listed as exclusions in your policy documents.

“It is so important that you understand exactly what you are buying when you sign up for funeral cover. Ask the right questions before you buy the policy and then insist on receiving the policy’s terms and conditions so that you can make sure that you are receiving the cover you expected.”

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