If you’ve been reading the news or follow trending topics on social media, you would have picked up the furore after it was reported that a certain insurance company refused to pay out a client’s life cover. The story can be summarized as follows:
- Client had a pre-existing condition which he was aware of at the inception of his insurance policy (according to medical records) but never disclosed it to the insurance company
- This came to light after he was murdered in a car hijacking in 2016. The insurance company discovered the non-disclosure from his medical records.
- This matter was taken to the long-term insurance Ombud who ruled in the insurance company’s favour.
- The insurer, however, maintained its initial posture for a day or so in the midst of a public and social media storm and finally capitulated and agreed to settle the claim
The bottom line is that the insurance company was correct in its stance. The client was found to have been dishonest, even though his cause of death was not related to his pre-existing medical condition. It seems that the deceased would not have qualified for the cover, had he made full disclosure from the beginning. His actions could’ve had dire consequences for his beneficiaries, and quite rightly so, had it not been for the public outcry and backlash the insurance company received.
The moral of the story? It is also extremely important for consumers to understand all the T’s and C’s of any product or service procured and not have to rely on public pressure to remedy their situation.
The insurance industry, unfortunately, does have a poor reputation. I’ll be the first to admit, that even as a financial advisor, those contracts can be confusing and oftentimes ambiguous in their wording and terminology. Read them thoroughly and understand what you’re signing up for
- Understand how and why your premiums are escalated every year, if at all
- Understand how this escalation in premiums relates to your cover
- Understand what you are covered for, exactly
- Understand when and how you would be allowed to claim from your insurer
- Don’t lie. Ever. Be honest with your advisor and the insurance company providing you with your life cover. If you follow the rules and are honest in your dealings with product and service providers, the law should cover you