Ancillary benefits A superfluous luxury?

A recent case handled by the office of the Ombudsman for Long-term Insurance demonstrates the critical role that ancillary benefits can play to ensure the survival of the policy until a potentially valid claim is admitted.

As a general rule, the life insured bears the onus to prove, on a balance of probabilities, that he or she meets the criteria stipulated in the policy to qualify for the benefit being claimed. In order to qualify for a disability benefit other than a temporary disability benefit, depending on the disability definition, the life insured is usually required to prove that the condition is both total and permanent.

The challenge: proof of permanence

Subject to a definition of ‘permanent’ in the policy itself, generally a condition will be considered permanent if it can be shown that it is unlikely to change or that it will probably continue for an indefinite period of time. Proof of permanence can sometimes be an obstacle to a successful claim due to the nature of the medical condition upon which the claim is based.

The background

This was the case in a complaint received by the Ombudsman’s office recently. The complainant was a sole proprietor whose business depended on him alone for its survival and success. He was also the primary breadwinner. It was for this reason that he took out a life policy with the insurer to protect his family in the event that he became totally and permanently disabled to work.

In January 2010, a few days after his wife had given birth to their first child, the complainant was admitted to hospital after an acute onset of a neurological disorder causing paralysis of his limbs and muscles involved in breathing. After being incubated and mechanically ventilated, the complainant was diagnosed with Guillain Barre Syndrome. He remained in the intensive care unit for approximately 68 days. The episode left him wheelchair-bound and totally incapable of working in any capacity.

This was precisely the eventuality that the complaint sought to protect his family against when he took the policy out and he lodged a claim with the insurer accordingly.

Although a characteristic feature of paralysis in Guillain Barre Syndrome is the likelihood of recovery over a variable period, the complainant fell within a relatively rare group of patients with more severe and protracted disease as a result of which, as at the date of the claim, his prognosis was uncertain. His doctors advised that he would require rehabilitation for approximately a year - taking us to January 2011 - before his condition could be assessed for permanence.

As such, the complainant was, through no fault of his own, unable to prove at claims stage that his condition was permanent. The Ombudsman was therefore unable to come to his assistance.

Ancillary benefit: potentially crucial

Unfortunately, the complainant had not selected the waiver of premium payment benefit on temporary disability that was available as an ancillary benefit when he took out the policy. This means that even though neither the complainant nor his wife, who is currently on unpaid maternity leave, is earning any income at present, he must continue to pay the monthly premium to ensure that his policy is not placed in jeopardy and he can claim against it in future.

The addition of certain ancillary benefits to a life policy - often at a small additional charge - may serve to protect a client’s rights to the main benefits of the policy.