Life insurance: why claims fail .

We talk to experts about the top five reasons beneficiaries’ claims are rejected

LAST year South African insurers paid out R13,1 billion in life insurance policy claims. Unfortunately, claims worth another R332 million were rejected; the beneficiaries of the policies involved didn’t get a cent. Let’s look at the most common reasons claims aren’t paid out – and the pitfalls to avoid.

1 NONDISCLOSURE

This is when policyholders don’t reveal all relevant health, lifestyle and financial information, Henk Meintjies of Liberty Life explains. An example is when someone who suffers from high cholesterol doesn’t disclose it because they’re on medication and the cholesterol is under control. But the cholesterol is still a risk, and if you don’t disclose it you’d be insured in terms of an incorrect risk profile.

People sometimes make innocent mistakes, which insurers can accommodate – but if you withhold relevant information to try to get lower premiums or cover without exclusions, it’s a problem.

Rather be honest. Mention if you’re involved in dangerous sports or hob55,3% bies such as parachuting or scuba diving, or if you’re a pilot, mineworker, police officer or something similar that involves danger.

Hiding information when applying for life cover will place the value of your policy at far greater risk than any potential exclusions you may face, says Hennie de Villiers of the Association for Savings and Investments SA (Asisa).

2 UNDERWRITER’S EXCLUSIONS

This is when the policyholder dies of a condition that’s specifically excluded in the life policy. A life insurer can apply an underwriter’s exclusion if the policyholder suffers from diabetes for example but is otherwise healthy. Should that person die in an accident, or in any other way not linked to diabetes, the insurer would pay out. But if the person dies because of diabetes the claim wouldn’t be paid out.

3 TAKING THEIR OWN LIFE

All life insurers have a two-year exclusion period for suicide. This is to stop people who are planning to kill themselves from taking out life insurance shortly before they commit suicide. If a policyholder takes their own life within two years of taking out the policy, their beneficiaries wouldn’t be paid out.

Claims rejected because of suicide nearly doubled last year. Meintjies says claims for people who killed or injured themselves often increase in tough economic times.

4 FRAUD

Claim fraud is when false documents are submitted to get the insurer to pay out a claim to people not entitled to the benefit. De Villiers says there are syndicates that specialise in this kind of fraud but sometimes it’s committed by the policyholder or the beneficiaries of the policy. Insurance companies have departments that sniff out this kind of fraud and the claims are rejected.

5 DRIVING UNDER THE INFLUENCE

If a policyholder died while driving under the influence of alcohol or drugs, they were driving illegally.

De Villiers says there must be a direct link between the effects of the alcohol or drugs and the accident that caused the death, and the insurer must be able to prove this.

If it can be proved the accident was the policyholder’s fault, the beneficiaries won’t be paid out.