CR210

Waiting period – payment – funeral policy – failure to pay premium – lapsing of policy – fresh waiting period.

Background
The policyholder took out an assistance (funeral) policy covering his own life as well as the lives of certain members of his family. The premium payer was not the policyholder himself but the complainant who was also the nominated beneficiary. He paid the premiums via a deduction on his salary.

Premiums had to be paid monthly in advance. Provision was made for a fifteen day period of grace. If a premium had not been paid within the period of grace the policy would lapse. The policy provided that upon a reinstatement of the policy a fresh waiting period of six months would apply.

The premium fell into arrears in respect of the month of March with the result that the policy lapsed. In the same month the premium payer sent a letter to the insurer requesting cancellation of the policy because of the financial problems he was experiencing. The premium payer’s employer nevertheless continued to forward premiums to the insurer which were retained by the insurer with the result that the policy was reinstated. Nevertheless a fresh waiting period came into operation.

The policyholder died within the new waiting period. The complainant opportunistically took the view that the insurer did not respond to his letter of cancellation and that the policy was therefore still intact.

Discussion

It was quite clear that because the premium payer fell into arrears in respect of the month of March, a fresh waiting period had thereupon come into existence. The insured life died within this period with the result that the death claim could not be upheld.

Result

We pointed out to the complainant that a premium payer had no right to cancel the policy because he was not the owner of the policy. Even so, the insurer undertook to return all premiums received after March (i.e after the date of the proposed cancellation) to him.

MFBR
November 2006