Ombudsman Recommends Shopping Around For Life Cover
Online, October 13, 2010 (Newswire.com) - Judge Brian Galgut, the ombudsman, in a recent edition of the Ombuzz newsletter, cautioned consumers against inadequately explained pre-existing condition exclusion clauses in life insurance cover and credit protection policies.
While life insurers may not force you to go for medical testing up-front as a pre-condition for issuing life cover, this doesn't mean that your health and medical condition prior to signing up for cover is irrelevant.
The Ombudsman for Long-term Insurance, Judge Brian Galgut, warns, that life cover policies are frequently sold with the assumption that if you were to die or become disabled as the result of a pre-existing medical condition, it won't pay out.
Pre-existing condition clauses help life insurance companies mitigate their underwriting risks. If no medical testing is required as a condition of cover, underwriting will generally be done or completed upon claim. In such cases, the insurer will conduct checks on your medical history retrospectively. If material evidence exists that you had a health condition that directly contributed to your claim, be it upon death or dread disease diagnosis, the insurer may be legally entitled not to settle your claims.
With regards to disclosing any material facts or pre existing health conditions, the onus also rests on the policyholder to disclose facts as honestly and fully as possible. Judge Galgut does, however, continue to point out that life insurers cannot rely on pre-existing condition clauses in all cases.
In order to refuse a claim, the insurer must prove that the pre existing condition did lead to the death or diagnosis that resulted in the claim Exclusion clauses for pre-existing conditions are the most common complaints to the ombudsman's office, he says, and the problem is that consumers do not understand pre-existing condition clauses. Pre-existing condition exclusion clauses also relate to insurance products such as funeral plans and hospital cover.
Galgut warns that being aware of potential policy exclusions is therefore advisable to prevent any potential claims refusals. Some policies feature holding periods, rather than permanent exclusions.
Many credit life policies are sold via marketing or telesales channels, rather than by life cover brokers, which does at times lead to policy exclusions not being adequately explained. This frequently results in complaints relating to inappropriate policy advice being submitted to the ombudsman under the Financial Advisory and Intermediary Services Act (FAIS).
The ombudsman points out that even though credit providers can insist that you obtain life cover for debt, they cannot force you to choose a particular product. You are fully entitled to shop around for the best insurance cover solution for you.