Funeral policies are typically the ones with the most leniency if you are unable to pay your premiums.
The Policyholder Protection Rules issued under the Long-term Insurance Act oblige life insurers to notify you within 15 days of you not paying a premium on the due date and to give you a further 15-day grace period before you lose the cover – known as lapsing your cover.
If the premiums are paid more than once, but at intervals of a month or more, the insurer must notify you within a month and give you a further month to pay the outstanding premium before the cover lapses.
However, many funeral insurers offer longer periods as “premium holidays”. Each policy is different and you need to check the terms and conditions of your policy.
A premium holiday usually means you can miss a certain number of premiums and still be covered. The cost of this is built into your premiums.
If you are still not able to pay at the end of the “premium holiday”, you will go into arrears. You must be notified you are in arrears within 15 days and you must be given at least another 15 days to pay the outstanding premiums.
An insurer may give you longer – but they should notify you how long you have to pay the outstanding premiums.
Claims when in arrears
If there is a death in your family during this period, the insurer will pay out a valid claim but will deduct the outstanding premiums first.
However, if you still do not pay the outstanding premiums and the grace period expires, your policy will lapse or terminate and should there be a death in your family, you will not enjoy any benefits from the policy.
If you then want to resume your cover, you will have to start a new policy with new waiting periods.
Some life companies have another step – if you still haven’t paid your premiums after the grace period, they will suspend your cover – meaning no benefits if a family member dies. They will, however, give you up to three months to catch up the missed premiums before your cover lapses. This means you have three months to reinstate it without the life company imposing new waiting periods for deaths from natural causes and suicides.
Some companies allow you to skip a number of premiums over a period – for example six premiums over three years, but they base your cover on the premiums paid over a certain period – for example, the past six months – so the more you fail to pay your premiums, the more your insured amount decreases.
