What Is a Funeral Policy?

You choose a cover amount for each person you insure, name a beneficiary, and pay a monthly premium. When an insured person dies, the beneficiary or claimant sends the insurer a claim with the required documents. The insurer must decide whether to pay, repudiate or dispute the claim within two business days after receiving all the required documents. If it disputes the claim, it has a further 14 business days to decide.

The two-day rule is a deadline for a decision. The rule text does not set a deadline for payment, although many insurers publish their own promises. Our payouts guide shows what each insurer says.

A policy can cover you, a spouse, children, parents and extended family, depending on the plan. The cap applies per life insured, per insurer, however many policies you hold with that insurer, and riders count towards it. Different insurers do not add up against each other.

Each plan sets its own limits, which are often lower than the legal maximum, and insurers limit cover for children by age. Compare what each insurer publishes on the comparison page, and use the calculator worksheet to decide how much you need.

Most policies pay cash. Some plans provide the funeral itself. Two Mountains sells burial plans with a service value from R15,000 to R50,000, for the policyholder only, and says it will pay a cash payout equal to the cover if circumstances require it. Icebolethu's plans are funeral service packages with no cash sum stated. AVBOB's Cashback Funeral Cover pays cash, and AVBOB Funeral Service adds free funeral benefits, valued at up to R24 500, but only if AVBOB Funeral Service conducts the funeral. Ask which kind you are buying and what happens if you prefer another undertaker.

The rules cap the waiting period for natural death at six months, or a quarter of the policy term if that is shorter. No waiting period may apply to death from an accident or when a policy renews. A new insurer may not impose a waiting period if you had earlier cover with another insurer for similar risks on the same people and had already served that waiting period.

A policy may not exclude pre-existing health conditions, except through the waiting period. It may not exclude suicide for more than 12 months from the start.

If a premium is unpaid, the insurer must tell you within 15 days, and cover must stay in force for 15 days after the due date for monthly premiums. A term that lets the insurer refuse a claim because a premium was paid late is void if you paid within the grace period. A valid claim for a death in the grace period may be reduced only by the unpaid premium.

If the insurer reinstates a lapsed policy, it must be on at least the same terms with no new waiting period. A new policy with the same insurer within two months of a premium lapse also gets no waiting period, except for any unexpired part of an unfinished one. Use the 31-day cooling-off period after you buy to read the policy carefully.

An insurer may not refuse a funeral claim for non-disclosure of information it did not specifically ask for before the policy started. Answer every question honestly, and keep your policy papers and proof of payment.

If a claim is declined or mishandled, complain to the insurer first. You can then go to the National Financial Ombud on 0860 800 900 or at nfosa.co.za/submit-a-complaint/. The Ombud's service is free, and you can complain in any official language. It may dismiss a complaint if three or more years have passed since you knew or should have known there was cause to complain.

A licensed insurer must carry the risk, and anyone selling must be an authorised financial services provider or its representative. A funeral parlour that sells cover needs a licensed insurer behind it and must itself be authorised, while a parlour offering only funeral services needs no authorisation.

Check a seller on the FSCA's search page at fsca.co.za/Entity-Persons-Search/?iframe_target=financial-services-providers, and check the insurer on the Prudential Authority list. The FSCA's toll-free number is 0800 110 443. Read funeral cover scams and your rights for red flags.