Death is certain, but the impact can be minimised through proper planning and awareness. Responsible people minimise its impact by taking a funeral policy. They will live peacefully knowing they will be assured of funeral services or financial cover for their family if the unfortunate event happens. If you make a funeral claim in future, expect it to be paid, delayed or denied. In many instances, insurers keep their undertaking and honour the claim after the insured’s death. However, very often, funeral claims get rejected for numerous reasons. Understanding such mistakes could help in averting them in future.
By Farai Francis Zhara
If an insured dies within the waiting period, the insurer has the right to reject the claim. You must therefore check your policy about this period. The period differs depending with the insurer, type of the package and beneficiaries. The waiting period for dependants for some insurers can be up to six months while others may say three months.
If the deceased is not listed as a beneficiary, then insurers may deny the claim on the basis that the deceased was not on cover. If A, B and C are your beneficiaries and M dies and you make a claim, it will be rejected. Again some may ask the insurer to remove B and put M, but this is not possible in insurance and therefore the claim will be rightfully denied.
A funeral policy is active only if premiums are paid on time. When no premium is made when it is due, a policy may lapse. Insurers have the right not to accept a claim on a lapsed policy.
However, insurers often regard nonpayment of premiums as a reason to decline a claim even when a claim should be paid. As a policy holder or beneficiary, ask if the insurer sent premium-due notices to you. Check the correctness of the address as well. The notice must be clearly warning the insured of the impending lapse. According to the Insurance Act [Chapter 24:07], failure to do this will validate the claim if the proposer is able to pay arrears.
Insurers are also obliged to give a grace period. You must also check if your policy is not within this period. If it is within this period, your claim must be accepted upon payment of all the arrears or these may be deducted from the proceeds of the claim.
Insurance works on trust and proper disclosures. Hiding information can lead to rejection of a claim. Non-disclosure refers to a situation where one fails to tell a relevant fact when applying for a policy. It is the duty of the insured to volunteer material facts. At law, a person applying for a policy is compelled to disclose all material facts. If a person fails to disclose these facts, the claim will be rejected on the basis of non-disclosure of material facts.
Insurers may also lawfully reject a claim if the name of the deceased is different from that which is listed in the policy. It all varies with the type of scenarios. In some cases, for example, where a maiden name was used the claimant may be asked to prove this and the claim will be accepted. Failure to do so will result in rejection of the claim.
This is different from the waiting period. The contestability period is a time frame which insurers can investigate claims and reject or accept them. Usually the period is two years. If a claim is made within the contestability period, the insurer has the right to examine the policy. They will assess the terms of the policy, as well as cause of death. If inaccurate information was provided, a claim can be denied even if the policyholder’s cause of death was not related to the misrepresented information given.
If claiming after the contestability period is over and inaccurate information was provided, this will not be an issue and the claim will be accepted.
If X is listed as a beneficiary to a policy and Y claims for the benefits, the insurer has the right to reject that claim until the rightful beneficiary turns up. It is unfortunate that people generally buy life insurance when they are young and name their parents or spouse as nominees. As they grow old, a lot may happen. Parents may die and some may remarry and fail to update nominee details. So when the claim arises, the present spouse will make a claim and it gets rejected until when the first spouse, who is listed as a beneficiary, turns up.
Insurers require proof of death when claiming. This can be a BD 11/12 form, burial order or death certificate. Failure to provide this may result in the rejection of a claim.
Too much delay in reporting a claim may lead to fraud suspicions. And insurers may withhold payment while investigating. At the end, they may also reject the claim.
Sometimes funeral policies have exclusions which draw attention to causes of death that will not be covered. Exclusions are clearly worded by the insurers. But at the time of claiming, it can be difficult to assess whether or not the death was not covered by a life insurance policy.
If the insured, whether sane or insane, dies by his or her own act within a stipulated period in the policy document, the claim will not be accepted. If, however, death occurs after the expiration of that period, then the insurer must not reject the claim. It is important to note that the Insurance Act states that “a life policy in which no provision of a stipulated time is contained shall not be void by reason of the insured, whether sane or insane, dying by his own act at any time after the issue of the policy”. In simple terms, this means if the time period is not stated and a claim is made, the insurer must pay the claim.
When the beneficiary is suspected of murdering the insured, some insurers will decline the claim. In this case, they will not receive the benefits until the investigations are over.
Here are some of the causes of death which might be listed by insurers as exclusions:
- Death due to illegal activities (eg, robbery)
- Death due to extreme and dangerous hobbies and activities(eg, skydiving)
- Death due to acts of war.
If any of the above is listed in the policy document as exclusions, then the insurer will have the right to deny any claim which came as a result of any of those causes.
When faced with a claim which falls within the above categories, do not stay home and make other plans, but instead go and make a claim. Let the insurer reject your claim, unlike rejecting it on your own. Insurers sometimes make ex gratia payments. This is when a claim is settled by insurers in circumstances where they are not obliged to do so.
l Farai Francis Zhara holds an MBA from the National University of Science and Technology and a BCom from Midlands State University. He is a certified client services practitioner with over a decade in the insurance sector. He writes in his personal capacity. firstname.lastname@example.org