Life insurance policyholders gets clarification on confusing questions
The ombudsman answers questions on life insurance premium payments.
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What happens if your bank forgets to process your debit order for your life insurance premium payments? Can the insurance group charge you for two months worth of premiums? When can the insurance company refuse to pay you out?
The ombudsman for long term insurance clarified some of these confusing questions in a bid to provide information to life insurance policyholders.
Essentially, the law states that it is the onus of the policyholder to ensure that premiums are paid.
Even if payments are made through a debit order, the insured person needs to check each money that payment was indeed made.
If premiums are not paid, the insurance policy will lapse and money will not be paid out.
The Long term Insurance Act states that policyholders are entitled to a grace period of at least 15 days, although some companies will give as much as 30 days before their policy lapses.
Should a debit order fails one month, life insurers have the right to do a 'double debit' the next month, whereby they recover that month's payment plus the previous month's which didn't go through.
Some groups even lodge triple debits in certain circumstances.
The insurer has to inform the policyholder if the premium has not been received, according to the Long Term Insurance Act.
Policyholders should remember to check their bank statements regularly to ensure that the premium was paid in advance.
A missed premium requires instant action to ensure that the policy is still in force.
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