You can claim the benefits of a life policy if you are the named beneficiary on a policy of someone who has died. A guardian can apply on behalf of a minor beneficiary.
If the policy has been left to the estate, the executor will need to lodge the claim.
You can also claim if you are the policyholder and the insured was, for example, a business partner.
If a policy has been ceded to you because you are owed a debt, you will also have the right to claim on it.
To lodge a claim, the life insurance company will need you to fill in a claim form and to provide original certified copies of:
The life insurer may request certain medical records.
If the death was due to unnatural causes – an accident or crime, the life insurer may also need:
If you are a beneficiary, the life insurance company will check that you are person named in the policy.
The life insurer will also make sure the policy is still active or in force. Policies lapse if the policyholder stopped paying premiums or if the policy had a term, such as to the policyholder’s retirement age, that has passed.
If everything is in order, the life insurer should pay out the death benefit within a few days, but it can take two months or longer, depending on the circumstances.
If the benefit is still not paid 60 days from the date all the documents required by the life insurer were provided, the life insurer may pay interest on the benefit.
If you don’t know the name of the insurance company, you will have ask each life insurer to search for the policyholder’s identity number.
How long do I have to file a claim?
Life companies that are members of the Association for Savings and Investment South Africa (ASISA) have drafted a standard that recommends that claims be paid no matter how long after the death you claim, as long as the policy was active at the time of death.
This Standard on Unclaimed Assets is, however, not binding on life companies. This means life companies can rely on the Prescription Act to deny a late claim. The Act provides for claims to prescribe if you do not lodge them within three years of becoming aware of your right to claim.
Life assurers may include time limits for claims in the policy terms.
ASISA’s standard does not apply to retirement annuity policies and preservation fund products, which are dealt with in terms of the Pension Funds Act.
A big lump sum
If you are a beneficiary about to be paid out a big lump sum by a life insurer, get some advice on how best to manage the money to make it last, especially if it is intended to support you or the policyholders’ children.
Some life insurers structure their benefits as either a lump sum or a monthly income (annuity) at the inception of the policy and give you or your beneficiaries the option take either the lump sum or the monthly income at claim stage.
If the life insurer gives you this option, you will have to weigh up the potential benefit of the combined annuity payments being higher than the lump sum if you live a long time, versus the possibility that you may die before receiving monthly income payments equal to the lump sum you could have collected.
Alternatively, you can take the lump sum and invest it in a voluntary purchase annuity – a product life insurers offer that allows you to invest a sum of money, such as a death benefit or your savings, and have the sum and the growth on it paid back to you as a monthly payment.
Like the compulsory purchase annuities you buy with your retirement savings, voluntary annuities come with many options.
You can buy:
The monthly payment will be mostly tax free – only the interest on the investment will be taxable. The capital that is repaid to you is not taxable.
You will need to assess all advantages and disadvantages of using such a product against any other investment you may consider, taking into account among other things, the tax, volatility and your circumstances.
