Know what you sign up for in life insurance

Johannesburg- It is a serious challenge for people to understand the terms and conditions of the life insurance policies they signed up for.

The importance of knowing and understanding what is entailed in your policy cannot be overemphasised.

Read the fine print because it is risky for policyholders to claim that they did not know the terms and conditions of what they endorsed with their signatures when the time comes for them to claim.

It is the norm for life insurance contracts to spell out the terms of your policy, including what is covered and what is not, as well as what you will pay and get when it is time for the policy to be paid out.

If push comes to a shove, consult a broker or an expert on insurance policies to explain to you and help you understand the terms and conditions.

Leza Wells, the chief product actuary at FMI, a division of Bidvest Life, says it is vital to understand the basic details and conditions of your policy upfront.

“You can rest assured that your financial goals will not be derailed by any unforeseen events. In order to understand the risks, you might be faced with, you should understand that most life insurers go straight to insuring against permanent disability, critical illness, and death with lump-sum benefits.

“The foundation of any risk plan should be an income protection policy, which covers you against the most likely scenario of an injury or illness.”

Wells says it is vital to understand what your insurance policy covers you for and for how long.  “People often assume a long-term disability will result in a payout on lump sum disability cover. However, this cover only pays out if your disability is permanent and your doctor confirms that your condition won’t ever improve.

“It is critically important to know exactly what you are covered for. You must ensure that you not only have temporary income protection, which pays for up to 24 months, but extended income protection as well,” she said.  Wells also pointed  out that people should choose a product that can adapt easily with them as life changes.

“Life is forever changing, and your insurance policy must be able to change with you, without you having to go through any further medical tests. If you have had a claim, or your health has changed, and your insurance provider requires medical tests for any updates to your policy, you may not be able to claim for certain medical conditions that might have developed since taking out your policy. However, in the worst case, an insurer can even decline to give you more cover,” said Wells.

She also adds that it is pivotal to understand premium patterns.

“Age-rated premiums increase with your age, and the premium charged each year matches the probability of claiming in that year. A level premium may prove more expensive to start with but remains constant for the duration of your policy as long as your cover remains level.”

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