Simple answers to questions about life insurance
Life insurance is a topic that often sparks lengthy debates, especially when discussed over a braai on a Saturday afternoon. A quick Google search for "life insurance" yields over 2 billion results in just over 1.25 seconds, which is less than half of what Old Mutual paid in 2022 for life insurance claims, according to the Old Mutual 2022 Claims Statistics Report.
So, why is it that the 2022 Financial Sector Outlook Study by the Financial Sector Conduct Authority (FSCA) found that only 1 in 10 South Africans have life insurance? You may have heard people say things like "life insurance is expensive," "I heard that insurance companies avoid paying claims," or "I would rather focus on paying off my bond so that my kids will have a home when I die."
Let’s look into some of the misunderstandings surrounding life insurance.
What is life insurance?
Life insurance is cover that pays out upon death to provide for your loved ones once you are no longer around.
Why do you need life insurance?
If you don't have life insurance to protect it, the lifestyle you've created for your loved ones may be compromised when you’re no longer there.
John Kotze, Product Management Head of Retail Protection Solutions at Old Mutual, says this about their cover,
"Old Mutual's Life insurance pays out a single amount of money or a monthly income when you die to ensure that those who depend on you can continue to afford essentials like school fees, accommodation, general lifestyle expenses, and other things that matter to them."
So, is life insurance expensive, or are we missing the bigger picture?
"Think about it this way: not having life insurance in place will be far more expensive for your loved ones once you are no longer around. An accredited financial adviser can help you determine the amount of cover you need, and together you can agree on a premium that suits your budget."
What must a person do to ensure that their claim is paid?
"Partner with an accredited financial adviser and be honest about your financial needs and goals," says Kotze. "Understand the product and its benefits, and disclose all your necessary medical, financial, lifestyle, and occupational information upfront. The information you provide when you apply for life insurance will be used to determine your premium and the amount of cover you can qualify for."
In what instances would an insurer not pay a claim?
"With life insurance, the main reason for a claim being rejected is non-disclosure – which is the fact or practice of not making information known to the insurer at policy inception. An example would be hiding the fact that you previously had a heart attack – which forces the insurer to take on a larger risk than they expect. Other reasons include fraudulent claims and general exclusions on your insurance policy for the event being claimed for – where exclusion means that certain causes of death are not covered by the policy. Your adviser can talk you through these," Kotze explains. "That said, at Old Mutual, we paid 99.5% of the life and funeral insurance claims received in 2022!"
For more information, speak to your financial adviser or visit https://www.oldmutual.co.za/life
• Old Mutual Life Assurance Company (SA) Limited is a licensed FSP and Life Insurer. Ts & Cs apply.
Disclaimer
The material is not intended as and does not constitute financial or any other advice. The material does not take your personal financial circumstances into account. For this reason, it is recommended that you speak to an accredited financial adviser to consider all your options and draw up a plan to achieve your financial goals.
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