Funeral policies can offer family members peace of mind that when a loved one passes away there will be funds to cover the expenses of the funeral and burial. However, there have been a number of instances in the media in previous months regarding people being debited for several funeral policies that they don’t really need, especially for social grant recipients.
However, according to Mellony Ramalho, African Bank executive for insurance, consumers often choose to have more than one funeral policy primarily due to the substantial costs relating to the death of a loved one. Multiple policy pay outs are used to fund the full cost of the funeral. “Consumers also prefer not to have one big policy with one insurer in case that claim is rejected. Multiple policies allow consumers to rather spread their risk.”
Ramalho highlighted that funeral policies are probably the most widely sold insurance product by volume in South Africa. She added that plans vary with different product features, premium ranges and bundled benefits allowing consumers to select the correct policy for their specific needs and budget.
Having a funeral policy
Lizette Erasmus, insurance expert at IntegriSure, noted that insurance policies can be taken out from the age of 18. She revealed that the earlier you take out a policy the better because not only do you not know when you will die, but also as you get older the more expensive the cover will become.
“A funeral policy is taken out by whoever wants to make provision for their funeral to ensure the costs are not passed onto those they leave behind,” explained Erasmus.
Furthermore, Erasmus highlighted that having a funeral policy with adequate cover means that when you pass away you are not leaving your loved ones with the financial burden of paying for funeral costs. “Also bear in mind that many product suppliers settle in cash, those funds can be utilised for any immediate unforeseen expenses as well as financial commitments while the will or estate of the deceased is being finalised.”
According to Erasmus, there is no clear disadvantage of having a funeral policy except in the rare instance where there is no body to bury due to, for example, a life lost at sea. However, if the body is not found after five years, the beneficiaries will be eligible for a pay-out.
Having multiple policies
However, Ramalho believes that the risk of ‘having too many policies’ is a very real one. “If a customer cannot afford the various policies, they will fall into arrears and their policies may lapse. A customer must therefore carefully assess his/her disposable income and ensure that the cover taken is the right product for their need and covers the family members most important to them. The value of the sum insured is very important, as well as considerations such as waiting periods etc.”
While you can have more than one funeral policy, there are limits as to the amount of cover you can get, and affordability will also play a role.
Erasmus pointed out that while you can have more than one funeral policy, it will need to be with different insurers, as by law you are not permitted by have multiple policies with one insurer.
Chris Ogden, MD of RubiBlue, stated: “One can have many funeral policies with other underwriters to maximise cover, although if high cover value was needed, rather opt for a life cover policy or the likes.”
To ensure that you do not have too many funeral policies in place, Erasmus emphasised that each person must determine their personal needs. “Different cultures and traditions dictate what is required for a funeral and the amount needed should determine how much cover and thereby how many policies on should have.”
However, she stressed that affordability also places a big role when it comes to funeral policies and the number and value of the policies that you have.
Protecting consumers
“In order to protect consumers the Financial Advisory and Intermediary Services (FAIS) Act has stringent requirements for insurers and financial services providers around information that must be provided to a potential policy holder. This is important when a funeral product is promoted, when it is being sold and during the lifetime of the policy. A consumer can be assured that any authorised Financial Services Provider (FSP) must adhere to these conditions. If the consumer is concerned in any way s/he can at any time lodge a direct complaint of non-compliance to the relevant FSP, insurer and/or Ombudsman,” highlighted Ramalho.
If you feel that you are being taken advantage of, Ogden noted that you should try speaking to your service provider first. If your issue is still not resolved, you can contact the FAIS.
Erasmus emphasised the importance of knowing your rights as a consumer. This includes making use of the various resources at your disposal, such as magazines, newspapers, and consumer education programmes on radio and/or TV. By knowing your rights you can reduce your chance of being taken advantage of by an un-reputable service provider.
“It is important to educate policyholders to do timeous monthly payments to ensure cover. Enquire about the applicable waiting period before you can claim as it differs for medical conditions and suicide. Accidental death, however, is usually covered immediately,” noted Erasmus.
Cancelling your funeral policy
A funeral policyholder can cancel cover at any stage with immediate effect, highlighted Erasmus. However, an insurer has to give a policyholder 30 days’ cancellation notice if they are terminating the cover.
Ramalho stressed that while a consumer has the right to cancel a funeral policy at any time, they would not be entitled to make any future claims against the policy once it is cancelled. Furthermore, you would also not be entitled to be refunded with all the premiums paid to date.
