Don’t let burial pol­icy turn into your fi­nan­cial grave

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CON­VER­SA­TIONS about death and fu­ner­als are never pleas­ant but cer­tainly nec­es­sary, as we are all con­fronted by death at some point in our lives.

We live in a di­verse coun­try where fu­ner­als have a dif­fer­ent cul­tural mean­ing and ex­pe­ri­ence, of­ten at a large ex­pense for those re­main­ing be­hind.

Bear­ing in mind the costs to bury or cre­mate a loved one, con­sumers seek in­sur­ance prod­ucts that can pro­vide cover for all the re­lated ex­penses.

The Fi­nan­cial Sec­tor Con­duct Author­ity (FSCA) has on many oc­ca­sions warned the pub­lic to be cau­tious when fu­neral in­sur­ance poli­cies are bought.

Many con­sumers have ap­proached the Of­fice of the Fi­nan­cial Ser­vices Providers (FAIS) Om­bud for as­sis­tance when the fu­neral cover they had been pay­ing for, is not pro­vid­ing them with the ben­e­fits they ex­pected to re­ceive. It is there­fore im­por­tant to clar­ify some con­cepts sur­round­ing fu­neral cover.

The pur­pose of fu­neral in­sur­ance is to pro­vide cover to as­sist with the pay­ment of the cost of fu­ner­als.

The most im­por­tant fea­ture is that fu­neral poli­cies must be un­der­writ­ten by a reg­is­tered long-term in­sur­ance com­pany. In terms of the Long-term In­sur­ance Act, a com­pany that pro­vides fi­nan­cial ser­vices must ei­ther be reg­is­tered as a fi­nan­cial ser­vices provider, or its poli­cies must be un­der­writ­ten by a reg­is­tered in­surer.

Why is this so im­por­tant? In­sur­ance is about risk. When a small fu­neral par­lour has 1 000 clients, it is pos­si­ble that it might find it­self hav­ing to cover the fu­neral ex­penses of 200 peo­ple at the same time. The chal­lenge is that the fu­neral par­lour might not have enough funds to meet this obli­ga­tion.

How­ever, had the poli­cies been un­der­writ­ten by a reg­is­tered in­surer, a pol­i­cy­holder and ben­e­fi­cia­ries would have been guar­an­teed pay­ment of ben­e­fits in the event of a claim, ow­ing to, among oth­ers, the ca­pac­ity of the in­surer and the min­i­mum sol­vency re­quire­ments. In­sur­ers are also sub­jected to var­i­ous laws which are en­forced by the likes of the FSCA and the Pru­den­tial Author­ity.

Most im­por­tantly, it is il­le­gal to con­duct the busi­ness of an in­surer when you are not reg­is­tered or li­censed to do so.

There are a num­ber of im­por­tant fac­tors which con­sumers should con­sider prior to tak­ing out any fu­neral in­sur­ance:

Ask for proof that the per­son or en­tity you are pur­chas­ing the pol­icy from, is li­censed. If in doubt, this in­for­ma­tion can be con­firmed with the FSCA.

When applying for a pol­icy, en­sure that you are noted as the pol­icy holder, and that you re­ceive a con­tract or pol­icy doc­u­ment.

Clearly state the re­la­tion­ship of the per­sons you in­sure un­der the pol­icy. This will pro­vide the in­surer with an op­por­tu­nity to de­ter­mine whether in­sur­able in­ter­est ex­ists, and whether cover would be pro­vided in the event of a claim.

Be hon­est when you com­plete the ap­pli­ca­tion and claim forms, as mis­rep­re­sen­ta­tion might re­sult in the can­cel­la­tion of the pol­icy, or re­pu­di­a­tion of a claim.

Do not sign any blank doc­u­men­ta­tion. It is a con­tra­ven­tion of the Gen­eral Code of Con­duct for any fi­nan­cial ser­vices provider to ask you to sign blank doc­u­men­ta­tion.

En­sure that you know what pre­mium you will be pay­ing to­wards the pol­icy. Non-pay­ment of pre­mi­ums will re­sult in un­paid claims and a lapsed pol­icy. Pre­mi­ums may also in­crease on a yearly ba­sis.

Take note of the spe­cial con­di­tions or ex­clu­sions ap­pli­ca­ble to the pol­icy. Some in­sur­ers ap­ply wait­ing pe­ri­ods to fu­neral poli­cies. There are also age lim­i­ta­tions to some poli­cies.

Do not take out too many fu­neral poli­cies. The ob­jec­tive is to pro­vide cover for the fi­nan­cial obli­ga­tions aris­ing from a fu­neral, and not to make profit of the death of a per­son.

If you are ag­grieved with the con­duct of any per­son or fi­nan­cial ser­vices provider who sold you a fu­neral pol­icy, you may ap­proach the Of­fice of the FAIS Om­bud to lodge a com­plaint.

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South Africa is a di­verse coun­try where fu­ner­als have a dif­fer­ent cul­tural mean­ing and ex­pe­ri­ence, more than of­ten at a large ex­pense for those re­main­ing be­hind, says the writer.

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