The life insurance mistakes costing South Africans their claims

Many South Africans discover their life insurance claims are being denied only after it's too late, often due to avoidable mistakes. Sankie Morata, Chief Executive of Sanlam Trust, and Karen Ferreira, Product Actuary at Sanlam Risk and Savings, have identified six common errors to avoid when managing life insurance policies.

First, failing to disclose crucial information is a significant issue. Morata explains that insurers depend on applicants providing accurate details about their health and lifestyle to assess risk and determine pricing. Inaccurate or incomplete information can lead to reduced or denied claims. To prevent this, Morata advises that when filling out an application, answer every question truthfully and completely. Even if you think a detail might not be relevant, it's always better to disclose it and let the insurer decide.

Second, choosing the cheapest premium is another mistake that can compromise coverage. While price is important, especially in a challenging economy, the cheapest policy may not offer the best value. Ferreira warns that a cheaper quote might indicate less comprehensive coverage or higher premiums in the future. Before committing to a policy, compare both the initial premiums and the projected costs over time to ensure you're getting the best value for your money.

Third, many people don't fully understand what their policy covers. Morata emphasizes that most individuals don't read their policy documents, leaving them unaware of uncovered risks or unnecessary expenses. To avoid this, Morata suggests that if you can't explain your cover in simple terms, you likely don't understand it well enough.

Fourth, understanding what your policy doesn't cover is equally important. Ferreira points out that exclusions vary by product, with common examples including suicide in the first two years of coverage and pre-existing health conditions. It's also crucial to understand waiting periods, which are the timeframes during which you must be unable to work before claiming benefits such as income protection. For instance, a 7-day waiting period allows claims for a 10-day sick leave, but not for a 30-day leave.

Fifth, missing premium payments can lead to the lapse of coverage, leaving you without protection during a time of need. Ferreira notes that there is typically a grace period before a policy lapses, but if payments are not made, the policy will expire. If financial difficulties arise, it's advisable to contact your insurer before ceasing payments, as they may offer alternative arrangements to maintain some coverage.

Finally, life insurance policies must be updated as life changes. Ferreira stresses that policies don't automatically adjust to life events such as marriage, childbirth, or the death of a loved one. Regularly review your policy and beneficiaries to ensure they reflect your current circumstances and wishes. Morata adds that it's important to consider inflation and adjust your coverage accordingly, as rising costs may render your current coverage insufficient in the long run.