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“Hello. Hi Brendan, I trust that you are well. Thanks for replying to my sms so quickly. Yes unfortunately you did read the text message correctly. My husband was killed in a car accident and we are absolutely devastated. I have taken a few days out to be with family, but I now need to put in a claim against our life insurance policy. Can you assist me? I just don’t have the strength to do this on my own and I wouldn’t know where to start”
That’s the dreaded call I had with a client a few weeks ago.
I must admit that the conversation rocked me and reminded me how fleeting life really is. One minute you’re on the way to work on a regular mid-week morning, the next minute your gone. In this case Mr. Smith is survived by his wife and 3 daughters.
So why am I writing a blog post about an awful subject matter like this when we have the biggest party in the world happening right in our own back yard?
It’s because in the ten years that we’ve been involved in financial services we’ve never had a death claim (and Lawrence and I have put in place hundreds of life insurance policies). So a death claim was totally unfamiliar territory to us. Now that our 1st death claim has been successfully finalized I want to share with you the efficiency with which the claim was handled.
I want to re-assure you that your life insurance policy will pay out (provided your ducks are in a row). I know there are skeptics out there who firmly believe that their life insurer is just looking for excuses not to pay. I can promise you – from first hand experience – that is not the case.
For the purposes of this article, I have changed the name of the client (only fair to respective their privacy) and I’m not going to mention the life insurer either because I don’t think it really matters.
What matters most is that I have learnt from this incident (and you can learn too!) and now know how an insurer handles a claim.
What type of policy was in place and which benefits could be claimed against?
Let’s start with what type of life insurance policy this couple had in place. It was a joint life policy (2 life insured’s on the same contract). Mr. Smith was insured for R3 million rand (payable on death) with Mrs. Smith (spouse) as the sole beneficiary of the life insurance proceeds and vice versa. The policy also included disability benefits but obviously this claim had nothing to do with disability.
Built into the death benefit was an “instant cash benefit” which was 10% of the life cover amount (limited to R50, 000) payable within 48 hours. This “instant cash benefit” was only available if the life insurance policy had been in place for more than 2 years and serves the purpose of creating quick cash flow that can be used for funeral expense purposes while the death claim is being finalized. In this particular case, the client’s policy had been active for 5 years, so they could claim the instant cash benefit. It’s important to note that the “instant cash benefit” was an advance on the total life insurance proceeds, but let’s have a look at the calculation below to make it a little clearer.
Instant Cash Benefit Calculation
Life Insurance Benefit: R 3 000 000 (total insured amount on the life of Mr. Smith)
Instant cash benefit is 10% of the life cover amount (limited to R50 000).
10% of R3 000 000 (total insured amount) = R300 000 so R50 000 (limited amount is payable)
R3 000 000 (total insured amount) less R50 000 (instant cash benefit)
= R2 950 000 net insured amount payable after the R50 000 (instant cash benefit advance)
So Mrs. Smith was able to claim R50 000 immediately under the instant cash benefit and the remainder of the life insurance proceeds R2 950 000 would be payable when the death claim was finalized.
What process was followed from start to finish?
- Step 1 – Notifying the insurer of the claim.
In this case I called the insurer directly to notify them of the claim. Either the beneficiary or owner of the policy or the broker who marketed the product could put in this call. You need to check your policy document to make sure you notify the insurer promptly at claim stage. You may find that the policy wording stipulates a specific time period within which this claims notification needs to take place.
- Step 2 – Insurer checks policy details and legitimacy of the claim
Now before an insurer is going to even entertain a claim they are going to check the following:
- Are the policy premiums paid to-date?
- Are you putting in a valid claim under a benefit you are insured for?
- Are you the beneficiary nominated on the policy?
- Are there any exclusion’s applied to the policy, and if so, do these exclusions apply?
The insurer was happy that all the requirements above had been met, so it was onto the next step.
- Step 3 – Death claim paperwork & supporting documentation needed to be submitted
A death claim is either going to be as a result of one of two things:
- Death as a result of natural causes ( Example: Heart Attack)
- Death as a result of unnatural causes (Example: Car accident)
How the life insurer handles the death claim is very much dependant on how the insured life passed away. In this particular case the insured was involved in a car accident, so the claim would fall into the category “death as a result of unnatural causes”. Of course the insurer would check to make sure that death was indeed as a result of unnatural causes before finalizing the claim.
This is the information that the life insurer asked my client to complete and compile in order to finalize the death claim. Again this might differ from one insurer to the next, but generally I think in this particular case (car accident) it’s all relevant.
- Copy of ID books (Insured Life & Beneficiary)
- Marriage Certificate
- Proof of Banking (Beneficiary)
- Application for Payment of a Death Claim (Insurer’s documentation)
- Instant Cash Benefit Form (Insurer’s documentation)
- Road Traffic Collision Report
- Unnatural Death Form
- Original Body Inspection Report
- Copy of the Post Mortem Report
The whole claim from start to finish took about 5 weeks to sort out. This excluded the instant cash benefit pay out.
The hold-up in finalizing the claim was as a result of the delay in receiving paperwork back from the SAPS (can’t blame them they probably have thousands of cases to deal with and are horribly under staffed). Items in Italic above are the requirements provided by the SAPS.
- Step Four – Insurer makes a decision based on documentation received
In this particular case, the turnaround time from when the life insurer received all the outstanding requirements until pay out was literally 48 hours. I’ve got to give Kudos to the life insurer here. The claims consultant handling the case was super efficient. Actually one of the original requirements set by the life insurer was waived altogether. I assume that they had enough information to satisfy themselves that the claim was legitimate and simply pushed the “pay claim” button. No mess, no fuss.
Just remember that the insurer does reserve the right to further investigate the cause of death if they feel they require more information.
What have we learnt during this process?
I think the most important thing we’ve learnt is that life insurers will honor claims and are not out to screw clients. Your life insurance policy is a legal binding contract entered into in “good faith”. Provided you have a legitimate claim that falls within the scope of your cover, you don’t need to worry about a repudiated claim. The second thing we’ve learnt is that we really have done the right thing for Mrs. Smith (and hundreds of other life insurance clients) 
Life insurance is crucial. Had we not meet with this particular client five years ago and stressed the importance of taking out life cover, she would have been in a situation today where the breadwinner in the family was no longer around to provide and nasty creditors are starting to creep up to the doorstep.
Mrs. Smith received her R3 million rand life insurance payout last week. While it can never replace her husband, it’s going to go a long way to helping ease her financial burdens. This is what she emailed me
“I can’t thank you and Lawrence enough for your help and support in this difficult time. You guys are simply the best. Thanking you sincerely.” Mrs. Smith.
If you have any similar experiences – or even nasty experiences – leave a comment.
We would love to hear from you.
Brendan
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