Ensuring that your life cover includes an immediate payment benefit is the key to getting a partial payout in only 48 hours.

One of the main reasons for taking out life cover is to provide for your dependants after your death. If you have family who are financially dependent on you, it will be critical for them to receive at least some payout from your life cover as quickly as possible after your death.

This can be achieved by making use of the immediate payment benefit offered by your insurer.

Boitumelo Mothoagae, Divisional Executive: Claims Management at Liberty, explains that the immediate payment benefit is simply a matter of ticking a box. There is no additional cost to the benefit.

Immediate payment benefit Ts & Cs

In the case of a Liberty Lifestyle Protector policy, an immediate payment benefit will pay up to 10% of the life insured within 48 hours, capped at a maximum payment of R100 000.

But note that there is a two-year waiting period on the benefit – the payout is only made if the policy has been in force for more than two years. If the policy has been in force for less than two years, then the immediate payment benefit will not be paid at all.

A policyholder can select the immediate payment benefit at any time, even after the policy has commenced, and the benefit will be honoured once the policy reaches two years.

When a claim is validated

The validation of a life policy claim requires an investigation into the medical history of the client. For example, the insurer would check whether there were any non-disclosed illnesses which may have contributed to the death. A non-disclosure could lead to the claim being repudiated (declined).

Mothoagae says that when it comes to a death claim, if the policy has been in force for more than three years, no validation will be required, and the policy should be paid out within a few days.

The only exceptions are in the case of murder, or where fraud is suspected. If the beneficiary is under investigation for the murder, neither the policy nor the immediate benefit payment, will be paid until the beneficiary is cleared of any murder charge.

If the policy has been in force for less than three years, validation will be required. If the claim is made between year two and year three of the policy, the immediate payment would still be made. However, if during the validation process it is found that the claim is invalid, the insurer can recoup the immediate payment benefit from the beneficiaries.

Death by suicide is a valid claim, but only if the policy has been in force for more than two years.

How long will you wait?

If a claim is validated, it requires all medical records including a doctor’s report. The time taken to pay out the policy is determined by how soon the insurer receives this information.

However, Mothoagae says for most death claims a validation is done within two to three months. The role of the financial adviser is important in this process as they can assist in obtaining all the relevant information.

Considering that an insurer will validate a death claim more easily for a policy that is older than three years, financial planner Kobus Kleyn says one should be careful about replacing a life policy without an excellent reason.

“Not only do you give up the three years early claim period validation, but you may find that as you get older, there are more health issues which can result in higher premiums or even exclusions.”

While it is essential that you disclose all your medical information and history when taking out a policy, you are not required to inform your insurer of new medical knowledge. Your premium cannot be adjusted after taking out a policy if your health declines.

You also give up your 24-month suicide clause period, where claims will pay out after two years if you commit suicide.

Make sure you disclose everything

The last thing you want is to have paid premiums for cover only to have the claim repudiated or declined. Last year, Liberty paid out R6.98 billion in claims. While more than 94% of all claims were paid out, 5.2% were declined due to the claims not meeting the necessary requirements (this is for disability or illness cover) and 0.3% were declined due to material non-disclosure.

Non-disclosure is when a client does not provide all the relevant information relating to their health at the underwriting stage. This results in the wrong premium being charged for the health risk.

“One of the major issues linked to not disclosing pertinent information is that at the claim stage, this may be picked up, resulting in repudiation of a claim and then the very essence of insurance is not fulfilled,” says Mothoagae.

Some of the reasons that claims are repudiated include the medical condition not being covered or not meeting the criteria for a valid claim, exclusions being applied, discovery that crucial details were not disclosed at inception, or the policy being inactive at claim stage.

If non-disclosure is discovered, the Didcott principle may apply to ensure fairness and consistency in the non-disclosure process. The Ombudsman for Long–Term Insurance has found that where, on a balance of probabilities, the non-disclosure is fraudulent or is made with the intention to deceive, then the Didcott principle should not apply. The following scenarios apply when non-disclosure is discovered:

• If the insurer would not have issued cover had they had the full information, the insurer will pay back the premiums less costs. This is to put both parties in the same position as they would have been had the policy not happened.
• If the insurer would have approved the cover but at a higher premium, with loadings or with exclusions, then the insurer will reconstruct the policy based on the premium received and calculate what cover they would have provided for that premium, considering the health risks.
• If the non-disclosure was not material to the policy and the insurer would have provided the same cover at the same premium, the policy will pay out in full

This article first appeared in City Press.