Considering taking out a funeral policy? Here’s how to avoid getting scammed

You have to be very careful when taking out a funeral policy, to ensure that you get the funeral insurance that you want for a time when you will probably not be able to think clearly after a loved one passes away.

Consumers often find that a funeral policy is not enough when they have to bury a relative although they have been paying monthly premiums.

It is unfortunately a fact that consumers are often misled when they buy a funeral policy because they trust the person selling it, especially if that person is a member of their community.

The best way to protect yourself is to only buy funeral insurance from a financial services provider with a good reputation.

During the pandemic, many unscrupulous business people started selling funeral policies that do not exist and you have to be careful.

These false policies are often sold directly to consumers who must pay the premiums in cash, but there is no underwriter and premiums are not paid to a registered service provider.

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When you want to buy funeral insurance, it is a good idea to stay away from unregistered funeral services, ensure you deal with the right person, ask for a policy schedule and know who underwrites the policy.

Stay away from unregistered funeral policy services

While some funeral policy providers promise cheaper premiums and more benefits because they are in your community, remember that they are not always registered.

Rather buy a policy from a well-known provider and check that it is registered by contacting the Financial Sector Conduct Authority (FSCA) or the Association for Savings and Investments of South Africa (ASISA).

Talk to the right person

Some unregistered sellers would sometimes pretend to work for a well-known insurer or financial services provider and therefore you should ask for the details of the company and check if it is registered with the FSCA.

If the person does not want to give you the details, turn away and go somewhere else.

Ask for a policy schedule

After you bought a funeral policy. Ask the insurer to send you the policy schedule for your records and to confirm your cover.

Also, ensure that you do not sign for something that you do not understand. A good insurer will be transparent and give you all the information you need to give you the peace of mind that everything you want will be covered.

Who underwrites the policy?

Some people who sell funeral policies do not always work for the insurer and you have to ensure that you know which insurer underwrites the policy and will pay your claim.

It is very important to check all the details to ensure your family is not left in the lurch if a loved one passes away.

Never pay premiums in cash

Unregistered funeral parlours will often require you to pay premiums in cash without keeping a record of your payments.

Rather choose to pay with a debit order so that you can show that you have paid. Also do not start paying premiums before you received the policy schedule.

Different kinds of funeral policies

You can choose from various kinds of funeral policies. Some are group policies, while others cover individuals or an extended family.

Insurers sell these policies directly to consumers using salespeople, shops or banks or to members of various organisations.

Most of these do not have a savings element, while others offer funeral cover as a benefit.

The Long-term Insurance Ombudsman says the policy should, however, always offer an amount that will be paid as an alternative to a funeral.

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Tips from the Long-term Insurance Ombudsman

When you buy a funeral policy, also keep these tips from the Ombudsman in mind:

• By a policy from a company with a good reputation and do not let the salesperson tell you to hurry. Take your time and weigh up your options before you decide.
  
• If you buy the policy from a salesperson, always ensure that the person is licensed to sell it by the Financial Sector Conduct Authority (FSCA) to sell insurance. Ask the person to show you the license.
  
• Ensure that you know who the insurer is. Third-party administrators or retailers administer and sell funeral policies and therefore you have to know who underwrites the policy. Also, check the contact details of the insurer or funeral association.
  
• If you complete an application, do it yourself and read everything before signing. Ensure that all the information you give is correct and make sure that you give an accurate description of how you are related to the people who are covered so that you do not end up in a dispute about who is covered.
  
• Answer honestly about your health and the health of other family members who will be covered. If you are dishonest and the insurer finds out about it when you claim, the policy can be cancelled and you will have to pay for the funeral out of your own pocket.
  
• Ensure that you get a copy of the policy schedule and insist to see and read it. Ensure that you understand everything and keep asking questions until you understand. If any of the information is not correct, insist to see that it is corrected.
  
• You have a cooling-off period of 30 days after you received the policy schedule to cancel the policy if you are not satisfied with it.
  
• Make sure that you pay the premiums on time every month. This is your responsibility, even if you pay per debit order.
  If your premiums are not up to date, the insurer can cancel the policy and refuse any claims. Funeral policies usually have a grace period of 15 days for late payments, but if you fail to pay, you lose your benefits.
  
• Make notes in writing of all the promises of the salesperson, administrator or insurer.
  
• Ensure that the details of all beneficiaries are up to date and should still be on your policy.
  
• Claim as soon as possible after a beneficiary’s death as insurers can refuse to pay out late claims.
  
• Make sure your family knows where you keep the policy documents.
  
• You can insist on written reasons for refusing a claim.