Funeral plans and matters arising

Many people do not want to hear about funeral insurance policies because not everybody wants to be reminded about the inevitable.

The same way every human being would hate to know the type of casket to be used in burying them or their relations is the same way a greater number of the public sees funeral insurance policies.

Indeed some young people don’t understand why they have to include themselves in a funeral plan if they intend buying same for parents, parents-in-law, spouses and children.   

Matters arising

Last week, following my write up titled ‘Rising Fraudulent Funeral Claims Worrying’, I received a couple of mails and calls from some people who expressed their displeasure at the way some insurance companies handle funeral policies, especially at the claims stage.

This pointed to the fact that many funeral insurance policy holders had very little understanding of the policies right from inception and the insurance agents, especially came into sharp focus.

Sammy’s predicament

One of them, who I would use as a case study, was sent to me by Sammy, a friend, and it reads as follows:

‘I had a funeral policy with XXX Life Insurance Company.

I was the one who signed onto the policy to cover my mother, spouse, a child and my mother-in-law. Premiums were computed based on the ages of each of these relations and I agreed to pay.

We had agreed that in the event of death to any of the above, including myself, an amount of GH¢5,000 was going to be paid me as compensation to apparently take care of the funeral expenses.

I had contributed for almost four years before my mother passed on.

Contrary to my expectations per the agreed amount of GH¢5,000, only GH¢3,750 representing 75 per cent of the amount expected was paid me.

I got so upset about it and as if that was not enough, I was made to continue paying the premium, though reduced. I did not find the explanation given to me by the insurance officer as satisfactory.

He intimidated that assuming I, being the premium payer, had died earlier, the onus would still have been on the insurance company to continue cover even though premium would cease on account of my death hence that was what made it insurance.

By this, she explained that until the last life assured passed on, where 75 per cent of the GH¢5,000 on each one of them, the insurance company had to bear the burden of continuous payment of the monthly premium once I, the payer had died (per assumption).

I am beginning to feel cheated making me regret taking up the policy’.

My response

I wish to respond to this one and I am sure it will appropriately address the concerns of others who may have similar challenges.

Funeral Insurance Policy

Typically, a standard funeral plan, eternity plan, home call plan or whatever various companies choose to brand theirs has the following basic features:

Standard features

A typical funeral plan provides for the costs of burying oneself and can be extended to spouse, children (usually with a limit to 3 or 5), parents and parents-in-law.

The age requirements and limits vary for each one of these relations. For example, some insurers limit the maximum age of entry to 55 for self (that is the premium payer or principal life), spouse and 70 for parents and or parents in law. The maximum for a child is usually 21 years.

Premiums

Premiums are calculated based on the different ages of each of the persons listed in the cover, put together and principal life (self) given notice of how much to pay usually on a monthly basis.

Basic benefits

Standard funerals will pay out 100 per cent of the sum assured on the death of the principal life (policyholder) and wife / husband.

In the event of death of a parent or parents-in-law, 75 per cent of sum assured of the GH¢5,000 would be paid.

Please note that in the unlikely event that both parents and both in-laws should die at the same time, the insurance company has the headache of paying on each of them 75 per cent of GH¢5,000 at the same premiums paid up to date.

In the event of death of an insured child, usually 25 per cent of the sum assured (GH¢5,000) will be paid under the policy.
 
Who is a Child?

I have, on countless occasions, met people who wish to know the definition of a child as far as insurance is concerned and I believe the following will help:

‘A child, in a funeral plan, means legitimate (with a legally married spouse) or illegitimate child (out of wedlock or ‘away benefit’), adopted child or step-child.

The funeral insurance plan comes to an end on the child when the child attains age 22. Similarly, the policy also ceases as soon as the child gets married and this is possible at age 18 (whichever comes first).

Cover continues regardless of which relation dies first

Usually, the premium payer would stop paying premiums at age 60 or 65 depending on available regular sources of income to enable him or her afford continuous payment.

Whether or not the principal life continues to work, once this age is reached, all he or she would wait for are the benefits subject to the fact that there is no outstanding premiums due at the date of ‘retirement’, before the occurrence of death to himself / herself or any insured member of the family.

Introduction of cashback

For marketing purposes, in the face of stiff competition, some insurers have added value to their funeral plans by introducing premium cashback.

It is more of a discount and to say ‘Glory be to God’ for no death occurring in the first 36 months of the policy.

The cashback amount can range from 20 – 30 per cent or more of the total premiums paid provided there is no gap in payment.

The way forward    

With my friend Sammy and others who have some grievances in respect of funeral policies, it is rather unfortunate that due diligence had not been done to make you understand the ‘inside outs’ of your policies.

That notwithstanding, I wish to advise that when we find ourselves in such situations, we should not begin having regrets but rather spend some time with senior officers of the specific insurance companies for deeper and clearer explanations.

We should all remember the fact that death strikes the family when we are really broke; let us purchase funeral insurance policies but we should ask questions! — GB

Until next week, “This is insurance from the eyes of my mind”