Life insurance policy terms and conditions explained

Your life insurance policy plays a key role in your financial plan by safeguarding your family’s future, ensuring they have financial security when you pass away. Life insurance contracts from licensed life insurers must be in plain language so you can understand exactly what your life insurance policy covers. But, there may still be a few terms, conditions, clauses and rules that seem complicated! We’ve identified and explained these terms and clauses below.

Understanding the basics of life insurance policies

Key to understanding the rules of your life insurance policy is understanding what life insurance is, how and when claims are paid, and how life insurance policy plans will benefit your loved ones.

A life insurance policy is simply a contract between you and your life insurer, where you agree to pay a certain monthly premium and your life insurer agrees to pay a sum assured to a beneficiary or beneficiaries on your death, for a valid claim. Your loved ones can use the pay-out to pay for future living expenses such as education, transport, housing, as well as settle any outstanding debts.

Life insurance policy claims are valid when all the terms and conditions are met. Paying premiums when they are due is one key term, but there are a few others you need to know.

Decoding life insurance policy rules and clauses

Your life insurance policy documents, such as your policy schedule or policy book, will have explanations of all the key terms and conditions and any clauses you need to be aware of so make sure to read these documents when you take out life cover. Your life insurer’s website should also have a glossary of terms to help you understand your policy. The most important life insurance policy rules and clauses are below.

Life assured and policyholder

The life assured is the person who would experience the insured event, in this case death. When the life assured passes, a claim can be made for the sum assured. Valid claims are paid to the nominated beneficiary or beneficiaries.

The policyholder is the person who owns the policy, and who is responsible for paying premiums, or ensuring they are paid, and nominating a beneficiary. The policyholder is usually the life assured, but may be another person or institution, such as a spouse or bank, who has an insurable interest.

Sum assured

This is the amount of cover the life assured applied for with the insurer and the amount that is paid to a beneficiary or beneficiaries on the death of the life assured for a valid claim.

Premiums

This is the amount you pay for the cover you have, such as R500 a month for R700 000 sum assured*. The life insured or policy owner is required to pay this on a certain date. If you miss a premium, South African life insurers offer a grace period in which you can make up the missed payment. However, if premiums are not paid on time or in the grace period, the policy may lapse and claims reduced or declined. Check with your insurer what the grace period is and when it applies so you know what to do if you miss a premium payment.

Commencement date

Your life insurance policy offers you cover from the commencement date, which is the date from which premiums must be paid monthly. 12 months after the commencement date, and every 12 months thereafter, will be your policy’s anniversary date.

Annual contribution and annual benefit increases

The sum assured and/or premium for your life insurance policy may increase annually, on the anniversary of your policy. When you take out a life insurance policy you should check if and how the sum assured and premium increases and by how much.

Underwriting

Your life insurer will underwrite your life insurance policy, using the information you supplied in your application such as age, occupation and your medical history, including whether or not you smoke, to determine the level of cover to offer and premium for that cover. Underwriting is also known as assessing your risk, which is your risk of dying earlier or later than expected or the average.

Exclusions

Your life insurer may exclude certain events from your cover. These events may apply to all life insurance policies or only your life insurance policy. For example, all policies exclude cover for illegal activities such as crime. If you pass away while committing a crime a claim will be declined.

Exclusions that apply to your policy only are usually based on either a health concern, such as having lung cancer, or participating in a hazardous pursuit on a regular basis, such as bungee jumping. This means that should you pass away while participating in the excluded hazardous pursuit or as a result of an excluded health condition, you won’t have cover and a claim will be declined.

Waiting periods

Your life insurance policy may also have a waiting period for certain events, such as a two-year waiting period for claims where the cause of death is suicide. A waiting period is the time during which premiums must be made but claims cannot be made.

Disclosure

Disclosure is simply telling the whole truth and anything you suspect may be the truth so that the underwriters can properly assess your risk. Answering all the questions on the application form accurately, honestly and in detail, ensures you will disclose all the details your insurer needs.

Not disclosing material information that can affect your risk or not answering your insurer’s questions honestly and comprehensively will lead to a claim being reduced or declined.

1Life Insurance makes life insurance policies easy to take out, understand, manage and claim on

1Life Insurance is a licensed financial services provider and prides itself on insuring and changing South Africans’ lives for the better. We cover your life so your family can have financial stability when you pass away. 1Life Insurance is focused on offering excellent customer service and life cover that you can tailor to your needs and budget. You can request a quote and buy a policy online, and manage your policy through our digital channels, such as 1Life’s online policyholder service portal and WhatsApp service centre, safely and in your own time.

Your life insurance policy gives your family financial stability

But you have to understand and meet the terms, conditions, policy rules and key clauses. If you don’t, the claim may not be paid, which would leave your family without the financial resources they need. Always read through your life insurance policy document so you know which rules and terms apply to your policy, and ask your insurer or financial adviser to explain any rules or terms you don’t understand.

 * Exact premiums will depend on plan and cover chosen.