Themba tells Sophie that when choosing an insurance policy there are a few things she needs to take note of:
• Is the cover what she needs?
• Can she afford the premium (monthly payment)?
• Does she understand the terms and conditions for the policy?
• Does she know what her excess is? Excess is the amount she needs to pay before the insurance company will pay out for short-term insurance
Themba also tells her that insurance policies usually have a 30-day cooling-off period. This means that she can cancel her policy within 30 days if she decides she doesn’t need it without having to pay any penalties. She can also cancel her cover at any stage if she decides she no longer needs it but may need to pay for the notice period, which is normally one month, and other penalties may apply.
When deciding to take insurance you need to do an affordability calculation and needs analysis. This helps you to really decide if you need the insurance cover and whether you can afford the premium. To protect you, your employer may limit certain types of deductions from your salary. For example, the government limits the deduction of long-term insurance premiums from a government employee’s salary to 15%.
Sophie wants to know more about the payment. How does she know when to pay it and when she’ll be covered for? Themba tells her that the payment is called a premium. Your premium can be paid monthly or yearly. It is always paid in advance. “So, if I pay on the 1st of May I am covered for May?” asks Sophie. Themba tells her that is correct. He also says that it is best to set up a debit order so that you don’t have to remember to pay the premium every month. If you don’t pay, you won’t be covered.

Themba asks Sophie if she knows what a beneficiary is. She tells Themba that when she previously had funeral insurance, they asked her to choose a beneficiary. She put her children on the list and was wondering if she did the right thing.

Themba says it is very important that you choose beneficiaries but you need to think about what you want them to do. Let’s first look at what a beneficiary is. Themba tells Sophie that a beneficiary is the person who will receive any money from your insurance policy if you die.

He goes on to say that an insurer may allow you to have more than one beneficiary. It is better for you to tell your insurance company who you would like as a beneficiary because if you don’t then the money will form part of your estate. If there is no will, then your estate could take a long time to be wound up and for your beneficiaries to receive the money. If you nominate a beneficiary on a policy, the policy proceeds don’t form part of the estate’s assets.

Who you choose as your beneficiary is up to you? It can be anyone you would like, your family, friends or a neighbor. With funeral insurance it is best to choose someone who knows what type of funeral you would like and who can organize it for you. Themba tells Sophie that by choosing her children she may put them in a difficult situation. They will get the money but might not be able to spend it if they are not adults. The Master of the High Court will hold any insurance benefit given to a person under 18 until they are 18 and legally able to make decisions, if there is no guardian. You can put a legal guardian in place that would be able to make decisions on behalf of your children. They would then be able to receive any benefit from your insurance. Make sure that the person you choose to be the guardian for your children wants to take on the role.

Sophie says she might need to change her beneficiary but isn’t sure if she can. Themba tells her that although different insurers may have different rules, most will probably allow her to change her beneficiary whenever and as often as she would like. You should always check that your policies are up to date, including your beneficiaries. Insurance companies have a duty to pay out any benefits and if your policy is not up to date it makes it very difficult for them to pay the correct person or people.

Themba asks Sophie if she has any questions on insurance. She says she has heard about a no-claim benefit and paid-up policies but doesn’t know what these are. Can he explain? Themba says he will start with the no-claim benefit. What this means is that you have an up-to-date, fully paid policy but you have not made any claims on it. Some insurance companies reward people who don’t claim by paying out “bonuses”. They say they will pay back your premiums for a certain time. Each company has different rules around their no-claim benefits so you must ask your insurer for the details on your policy. It is their responsibility to explain it to you.

A paid-up policy may apply to a policy where the policyholder has dependents on his policy. The policyholder has paid for the cover in full and then dies. His/her dependents on the policy can still be covered by the original policy but don’t have to pay premiums or they can take out their own funeral policy.

Themba says there are two important terms that they need to discuss, waiting periods and exclusions. A waiting period is the time between when you take out the insurance policy and the first day you are covered.

Different policies have different waiting periods. In some cases, there will be no waiting period but in others it can be a few months before you are covered in full (such as for non-accidental death or disability). Themba tells Sophie that she needs to ask her insurer if there is a waiting period and how long it is for.

Exclusions in insurance are what the insurer will not cover you for. Exclusions help insurance companies to keep their premiums fair by removing certain risks. Sophie says that her insurer explained that if she for instance dies from skin cancer she would not be covered because she had previously been diagnosed with skin cancer. Themba says that is considered an exclusion. He also told Sophie to ask the insurer every year if they would remove one of her exclusions if the chance of the risk occurring decreases or there had been a change in her risk profile.

Sophie says that maybe it would be better not to tell the insurance companies about certain things if they were going to exclude them. Themba is shocked! He says that you must never lie to an insurance company when you take out insurance or when you claim. If you don’t tell the truth and the insurance company finds out they will not pay out anything if you claim, or they could cancel your insurance completely. An insurance company could also sue you for fraud if they discover you have lied and received a benefit from them.

Sophie says that she will always tell the truth.