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When will your life insurer not entertain a claim

We often hear horror stories flying around about life insurers not paying claims and it scares us because we all commit a fair chunk of our disposable income to life insurance premiums, in order to secure our family’s future, if we pass away. The bottom line is that life insurers do pay just about all of their claims - provided they are valid, of course. This is what you need to be aware of.

Life insurance is a contract. The insurer is prepared to underwrite your life and provide you with an agreed amount of cover in exchange for a premium (usually paid monthly). In order for the insurer to make an underwriting decision, they actually need to know about your health. At application stage you are asked a fair amount of question pertaining to your health, your family’s health history, what you do for a living, how much you earn and how qualified you are.

Why is this important?

It’s vital information the insurer uses to make an informed decision around how to price your cover.

Smokers pay far more than non-smokers, healthy people pay less than those who are unhealthy and more qualified people pay less than less qualified and lower earners.

You need to be truthful when completing your application form, because those questions (which might seem a little arbitrary) will not only be used to form the decision around your cover, but will form part of the life insurance contract.

And if you lie on the application, the insurer might use that against you when it really counts - when your loved ones need to claim.

These are points to remember when completing your life insurance application (whether on the phone or on a paper based application form)
  • Always disclose all your medical history, regardless of how insignificant you think it might be
  • Never lie about your smoking status. If you smoke, you smoke, even it is only 1 cigarette every weekend
  • Always provide as much detail about your occupation
  • Always disclose your real qualifications
  • Always be truthful about your income
If you enter into a life insurance contract in good faith (100% honestly), then you will never need to worry about your claim being paid out. If however, you’ve decided to stretch the truth or knowingly withhold information from the insurer, you might find they could start being a little sticky when it comes to paying out millions of Rands.

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The iHound