The Settlement – Will I Get Paid?

The whole idea behind taking out life insurance is that should the insured event occur, your beneficiaries will receive the sum of money you insured your life for. There have however been many instances where claims were made, but the benefits not paid out.

There are two primary reasons why a death claim is rejected: failure to disclose or to fully disclose material facts, usually about a medical or lifestyle condition at the time of application; and, suicide within 2 years of inception of the life insurance policy.

In 2006, life insurance companies in South Africa rejected about 1 919 claims with a total insured value of about R157 million for failure to disclose crucial information about a medical or a lifestyle condition. There were 2 748 additional claims valued at over R138 million also rejected, for failure to fully disclose the seriousness of a medical or lifestyle condition at the time of application.

Material non-disclosure is a very important issue in life insurance. The generally accepted principle is that when you apply for life insurance, you have a greater knowledge about the risk to be insured than the insurance company. Recognising this, the insurance laws of South Africa compel you, as a life insurance applicant, to disclose all pertinent information about risk factors that have a bearing on the insurer’s determinations of applicable terms and conditions on your policy, and their calculations of fair premiums.

Material information in this situation includes (but is not limited to) your personal medical history and that of your family, your lifestyle, and your finances. Misrepresentation will happen when the applicant for insurance totally withholds, or does not fully disclose information. In the majority of cases they do so because full disclosure to the insurer might result in a higher premium. People sometimes also fear that full disclosure of a medical or lifestyle condition could disqualify them from securing life cover.

The hard reality is that despite efforts to mislead insurers, they are usually able to detect misrepresentation — if not immediately, then later – before settlement is made or when the beneficiary is filing a claim. The consequence of misrepresentation may be that no assistance is paid for disability or dread disease cover, or that no benefits are paid out for death. The family could, as a result, be disabled financially in return.

If you want to ensure that your claim will be settled, here are some guidelines:

Pay particular attention to questions about your medical history when you fill out each insurance application form.

Be forthright about information on your health status and medical history, and also that of your parents, siblings, and other immediate family.

If you smoke and/or drink alcohol, say so.

If you engage in high-risk recreational activities or work in high-risk occupations (say, as an airline pilot, a weapons dealer, a scuba diver, an asbestos worker, etc), you should indicate the same in the application form.

Disclose chronic medical conditions you may have experienced in the past, even if you don’t exactly feel the symptoms at the time of application; they could recur.

Shop around. Analyse the premiums in the quotation vis-à-vis the terms (which may help explain why premiums are set at that level). Make sure to compare the quotations feature by feature.

Take time to understand how companies define the different claims events. Companies may differ in their handling of cover for various diseases like cancer.

Make sure you know how the premium guarantee periods work. Some policies guarantee the premiums for life; others do so for a specific term only and undertake a review.

Honesty does pay. And, where insurance is concerned, it pays when you need it most.