Are you feeling the economic pinch? Most South Africans are under real financial pressure, and while we all take out insurance with the intention of holding onto the policy, sometimes we miss premiums because we have other more urgent expenses that simply can’t go unpaid. It’s not a train smash provided you understand what you and your insurer’s obligations are.
-
Your insurer needs to notify you that your policy premium has been missed
Your insurance company has an obligation to notify you that you have missed a premium. They could do that in a few different ways (the law doesn’t stipulate how they need to go about doing it). Expect to receive an SMS or an email from your insurance company, and if you have a Broker relationship you will probably hear directly from them.
-
Your cover isn’t cancelled (but there is a time limit to get your premiums up to date)
This is the important one. If you miss a life insurance premium, your cover isn’t automatically cancelled. You will continue to enjoy your cover but there is a condition. You will be granted a “grace period” which is the period in which you need to pay up your outstanding premium. 99% of life insurance premiums are collected via an automatic debit order, lodged against your bank, on a specific day of the month. Most life insurance companies will end up notifying you that your premium has been missed and will automatically lodge a double debit order on the next premium collection run to collect the outstanding monies. It’s just easier that way. If you wanted to, you could always get the insurer’s banking details and pay the money across to them using your policy number as a reference (but an automatic double debit seems to be the norm nowadays).
Bottom line is that you have a “grace period” to pay up your outstanding premium and your cover isn’t cancelled automatically.
-
If outstanding premiums aren’t collected in full, your policy will lapse
If you don’t pay up your outstanding premiums, your policy will lapse. That means you forfeit the benefits you have been paying for. If you had R1,000 000 life cover in place, you will have R0. Again, it’s up to your insurer to let you know, via written correspondence, that your policy has lapsed, and your benefits have been forfeited.
Can you reinstate your policy? (Get it back up and running again)
This differs from one life insurer to the next, but in most cases the insurer will allow you to reinstate your policy. They have a right to ask you to complete a new declaration of health to confirm that there hasn’t been any change in your health. Worst case scenario is that they ask you to go for a new set of medicals and blood tests.
This is the major problem with having your life cover lapse.
Your health might have deteriorated since you originally took out your cover. Now you are stuck in a predicament. You can’t lie to the insurer and tell them that your health is perfect – you have to disclose the new issues and that might mean a steeper premium or even a health-loading.
Try to avoid having your life insurance policy lapse. If you feel like you are running into financial difficulties, give your insurer a ring and find out what your options are.
At Stangen we want to be transparent about our policy lapse rules. Here they are:
- If you miss a premium your details are handed to our customer services department
- They will get in touch with you to find out why the premium was missed
- We will arrange to double debit your account
- If you haven’t paid your premiums for 1 month your policy will lapse
Until next time.
The Wise About Life team
