Johannesburg – You may have a good reason for cancelling your life insurance policy, starting with a simple and common one: you do not need it anymore.
If your family has grown and your spouse or partner is able to manage on their own without a death benefit, it may be that life insurance does not need to be part of your financial portfolio.
However, with life being unpredictable, ensure you fully understand the terms and conditions of the cancellation before following through with it.
A recent judgment by the Supreme Court of Appeals (SCA) has highlighted the dangers of cancelling one’s life cover without understanding the terms and conditions attached to the cancellation.
The SCA upheld an appeal by Discovery Life against an order of the Gauteng division of the high court, in terms of which Discovery was held liable to pay out the proceeds of the life policy to Mrs Mary Mofokeng and Mr John Mofokeng*, who were the nominated beneficiaries under the policy.
Their daughter, Lebo*, took out a classic life policy with Discovery and insured her life for a sum of R3-million.
The said policy commenced on January 1 2016. However, on August 6 2018, Lebo cancelled her policy with Discovery, advising that she was moving over to Liberty Life.
Discovery noted her instructions but pointed out that the cancellation would only become effective after a period of 30 days and that the September premium would still be collected by debit order as usual on September 3 2018. According to evidence before the court, on August 23 2018, Lebo instructed her banker to stop the payment of the premium due under the policy for September 2018.
As a result, on September 3 2018, when Discovery submitted the monthly debit order to the bank for payment, the debit order was returned unpaid.
Discovery then wrote to Lebo on September 10 2018 and also sent her a text message to her cellphone advising her that her policy was consequently cancelled with effect from September 1 2018.
Lebo unfortunately died on September 22 2018 while on holiday at the Sani Pass Lodge, where she was overcome by carbon monoxide fumes. Her beneficiaries then approached Discovery, claiming R3-million of her life policy. Discovery defended the claim on the basis that the policy had been cancelled and it had ceased to be on risk on September 10 2018, 12 days before Lebo’s death.
The family then approached the high court, which agreed the money was payable, a decision which has now been reversed by the SCA.
If you’ve been toying with the idea of cancelling your insurance cover and revisiting it sometime down the line, here are three reasons you may want to reconsider your thinking, as provided by Standard Bank.
• Your loved ones If your loved ones, whether it be your partner, children, parents or even your siblings, depend on you financially, they’re likely to need financial support after your death. With life cover in place, they’ll receive a cash payout when you die, which will help them take care of dayto- day expenses like food and transport, monthly expenses like school fees and home loan repayments and even future expenses like tertiary education.
• Your age Your age is one of the factors that is taken into account when you apply for life cover and it can have a significant impact on the calculation of your insurance premiums. Right now, you’re the youngest you’ll ever be and, as premiums get more expensive the older you are, stopping your life insurance now means it is likely to cost more if you take out cover again later.
• Your health Your health also plays a key role in determining your monthly instalment amount. If you cancel your insurance while you’re still healthy and are then diagnosed with a serious illness, you may not qualify for cover should you decide to take it out again. If you do qualify, your premiums will likely be significantly higher than what you previously paid and you may not qualify for the same amount of cover as before. *Not their real names.
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