<strong>By: Sonja Visser, CEO of African Unity</strong>

Tough economic times, such as those brought on by the retrenchment of a breadwinner can have a devastating effect on a family, both emotionally and financially. It could mean that the household must take stock of monthly payments and make tough decisions on cutting down on some expenses.

Insurance policies are often the first to be scrapped since they are viewed by many as luxury purchases. However, as tempting as it may seem to save on these monthly premiums, it is seldom a good idea to be without cover that provides protection for your loved ones should something happen to you.

Sonja Visser, CEO of African Unity, believes that cancelling an insurance policy should be the last resort and that consumers should first chat to their advisors or insurance company if they have concerns around benefits or affordability.

“Most insurance providers understand this predicament and will help you find ways to restructure the policy to reduce the premium. Some will allow the policy holder to take a premium break for a few months and make up the shortfall afterwards,” she said.

She adds that if you cancel your policy and start a new policy when your circumstances change, you could end up paying higher premiums or be excluded for certain benefits, depending on your age and health.

<h3>Cancelling a policy:</h3>

If cancellation is the only option, then it is important that you adhere to the terms and conditions stated in the participation certificate relating to cancellation, which usually includes a one or two month written notice to the insurance provider.

If you are cancelling one policy in order to begin a new one, then it is prudent to have the new one in place and have completed any applicable waiting periods before cancelling the old one, to avoid being left uninsured.

<h3>Policy lapse:</h3>

Simply cancelling your debit order or not paying your monthly premiums, without written cancellation of the policy, may result in your policy lapsing. A policy lapses when the grace period has come to an end and premiums remain unpaid. During this period, it is the duty of your insurer to make every effort to contact you to advise you of the unpaid premiums and of the potential lapse of the policy.

Visser explains that if you are unable to make the regular payments on your funeral or life policy, your cover will be suspended until such time that you can continue payments. She adds that in terms of the Policyholder Protection Rules (PPR) a grace period of up to 45 days is offered for the policyholder to pay the premium after which the policy will be suspended. She adds that a suspension can last for up to three months, depending on the policy.

“Any claim made during this time will be paid out, but outstanding premiums will be deducted from this pay-out”, she says.

Once a policy has lapsed, policyholders have 30 days in which to pay their premiums to avoid cancellation of the policy. Visser adds that If the policyholder settles outstanding premiums within those 30 days then the policy will be reinstated with the same benefits as before the lapse.

“We understand that many families are facing financial hardship and that life can be full of unexpected situations, which is why we will take all the details into account when reinstating your cover”, says Visser.

However, Visser cautions that letting a policy lapse is not a good idea as all the value in the policy could be wiped out.

<h3>Cancellations by the insurer:</h3>

Your policy may, in some instances, be cancelled by the insurer. Depending on the reasons for cancellation, this may be with immediate effect or with a 30-day notice period. Reasons for cancellation with immediate effect include, dishonesty on the application form; leaving out crucial information that could affect the policy; or, acting fraudulently against the insurer.

Visser emphasises the importance of being honest when applying for cover or when claiming and adds that acting dishonestly towards the insurer affects not only the policyholder but everyone insured by that insurer.

<h3>Cooling off period:</h3>

If you have signed up for a policy as a result of direct marketing and you have a change of heart, you have a right to cancel it and receive a refund. Thanks to the “cooling off period” provided for by the Consumer Protection Act (CPA), consumers now have at least five days, after receiving their policy to cancel the agreement, in writing to the insurer.

Visser explains that AUL have extended their cooling off period to 30 days where, if written notice is received by the insurer, a refund will be paid.

Visser stresses that cancellation of insurance policies that provide for protection for families and loved ones should not be taken lightly. “However, if it is absolutely necessary, or if you simply want to cancel an old policy to begin a new one, then it is important to adhere to the terms and conditions of the policy to avoid being disadvantaged should you wish to take out another policy at a later stage”, she concludes.