I was reading a policy working recently and it had a definition of death in it that I found humorous. Not that dying is humorous but the way it was written was.
Death/Dies - Means irreversibly dead with no possibility of resuscitation.
It was along the lines of doh! yeah already, it’s life cover, you’re dead it pays, what’s hard about that.
Thinking about it, we’ve had stories reported in the media about people being pronounced dead, then waking up in the morgue or the autopsy table, some hours/days later.
I’d hate to be that person, but then the alternative of actually being dead, isn’t a great thought either.
Given the way I think; I hadn’t really stopped to check what the dead/dies/death definition in a life policy is. When a policy says dies it automatically translated to someone pronouncing death and writing a death certificate, from there a life insurance policy pays a claim. Which is the usual claim process.
Hmmm, maybe I should do some more digging, being an adviser who often takes advantage of interesting policy definitions maybe I’ll find one here.
What I’ve found has become a lengthy article, who said life insurance was simple! The Volo Lifestyle policy was the only one to define death, in the way outlined above.
Looking back at my blog articles I don't write a lot on life insurance, mainly because plenty has already been written.
Clearly when I do, I get carried away. You might want to settle in with a coffee on this or take it in bite size chunks :) my tools are telling me it's a long read at 2782 words and a slightly heavier reading age than my usual posts. More on that later.
Highlights!
What we call the suicide clause is pretty universal, no cover for the first 13 months if the cause of death was self inflicted. There was 1 surprising policy that pushed this much longer. More on this later.
What was interesting were the additional exclusion clauses around life cover, some quite surprising. If you have exclusions on your policy other than the 13 month suicide exclusion, you probably want to have a close look at another provider. Early death usually comes from unexpected places, not having extra exclusions means you have more security. Even the obscure ones you think will never apply.
The () indicate a very unscientific ease of reading score, more at the bottom on that too.
AA Life (49.8)
Die or terminal illness, they pay. Not surprising as Asteron Life stand behind AA’s life insurance policies.
What is surprising are the exclusions:
AA Life will not pay claims if your death occurs as a direct or indirect result of:
- you participating in a criminal or illegal act;
- you being in a country or region in which the New Zealand Government has advised against all travel or advised that all non-essential travel should be deferred. These countries or regions are currently classified as ‘Extreme’ or ‘High’ risk and can be found at www.safetravel.govt.nz. If the New Zealand Government no longer publishes these ratings, we will use the last rating list published by the New Zealand Government or choose an alternative list that we will inform you of on or before the next anniversary of the start date of your policy;
- Human Immunodeficiency Virus (HIV) or Acquired Immunodeficiency Syndrome (AIDS); or
- you engaging in a work or a lifestyle activity that involves explosives, weapons, heights above 20metres, depths below 30metres or speeds above 130km per hour other than as a fare-paying passenger on a commercial airline.
If you are an AA Life policy holder I serious encourage you to review your cover. Passing a car on the open road too quickly and die in a car accident as a result, you may not be covered.
Additionally, given this is a product from the motoring organisation of New Zealand, cars and speed are a very likely combination with their members, the last clause makes no sense because of this.
All 4 exclusions concern me, as exclusions on life cover can be and are nasty.
AIA (not determined)
Nup, no definition of death but an interesting clause in it’s premium payment section.
- We may cancel this arrangement at any time in respect of future Total Premiums.
That concerns me that the insurance company can suspend premium payments, and conceivable refuse to accept premium payments and put your cover at risk.
Not something I’ve seen but an interesting, tucked away clause, that isn’t exactly helpful for the policy holder.
AMP (not determined)
No definition of death but a simple straight forward clause.
If a Person Insured with this Cover dies then AMP will pay the amount of their Life Cover.
ANZ (28.3)
Cover definition, first occurrence of death or terminal illness. Not meaning multiple deaths, but payment of one claim, either for terminal illness or dead, not both. Mildly interesting wording.
Again several additional exclusions that undermine coverage.
- No benefit will be paid if the death of the PersonInsured is caused by war, invasion, act of foreign enemy,hostilities (whether war is declared or not), civil war,military or usurped power, rebellion, revolution,insurrection, riot or civil commotion.
- No benefit will be paid under this Policy in connection withthe Person Insured’s participation in any unlawful act.
- No benefit will be paid if at the date of the event of theclaim the Person Insured is not legally entitled to live, orto work in Full Time Employment (or Self-employment),in New Zealand.
The last one is concerning here, as a lot of immigrant clients have ANZ bank policies. If they return to their home country their cover cannot follow them, usually because of expired visa’s. Overstayers who have cover with ANZ effectively don't have cover.
ASB (33.7) & (33.1)
With Sovereign’s products behind also have no definition of dies. However only one of their life insurance polices has a special events option.
Pleasing to see ASB have no unusual exclusions on their covers, not really surprised as their product is the same as the adviser product from Sovereign that I have access to. Sovereign has always been quite protective of ensuring the dual branded policies are the same.
Asteron Life (28.6)
Own policy wording is more in-depth than the AA Life one, a bit like the ASB products, a simple one and one with more built in benefits and without the extra exclusions AA Life have. Though they do have a 30-day hurry up clause, more so for the living benefits than the life benefits.
BNZ (24.5)
Now this was a bit more interesting, a claim must be submitted within 30 days of the event or grounds for making a claim.
Makes it interesting in the situation of a mysterious death, where you have an absent suspected dead situation but 7 years until the authorities officially rule and issue a death certificate. Appreciate the need to get claims in and assessed, but 30 days is far too tight.
These two exclusions concern me:
- The Insured’s involvement in an unlawful act whether ornot the Insured is charged or convicted of an offence inrespect of that act; or
- Participation in war (whether war is declared or not),warlike operations, insurrection or civil commotion.
Two clauses often found in lesser quality policies and effectively leave you with a massive claim non payment risk. Dying in a situation of protesting the TPPA conceivable is an exclusion situation, which applies to the others with a civil commotion exclusion clause.
CIGNA (34.7)
Like AMP’s approach, you die they pay. Pretty straight forward.
Being a large company offshore, they have typically been a direct provider here, they have 1 additional clause where they won’t pay a claim.
- If the claim is due, directly or indirectly, to War or any act of War, invasion, Terrorism or any acts of Terrorism, act of foreign enemy, hostilities, strike, riot and/or civil commotion, civil war, rebellion, revolution, insurrection, military or usurped power
COUNTDOWN (29.3)
Pretty much a copy paste and rebrand of the CIGNA policy, though the exclusion clauses for the serious illness benefit need some attention.
Fidelity Life (36.2)
Again no surprises straight forward and no funny exclusions. There is a difference in the suicide clause, rather than say a self inflicted act they say by their own hand. Tomato / Tomayto, assisted suicide would put both to the test.
They do however have this added to their suicide exclusion.
- This clause shall not be applied to defeat any interest in this Policy acquired by a third party in good faith and for valuable consideration.
Which potential means a policy assigned to the bank may not have this clause applied in a suicide situation and still pay a claim to the bank or other interested party. Not sure Fidelity Life quite understands the ramifications of this.
Kiwibank (33.4)
For a bank product, as opposed to ASB’s life insurance company product, Kiwibank isn’t too bad on the exclusions, just 1 extra with war and terrorism.
MAS (37.5)
Interestingly I can access the umbrella policy wording but the actual life cover policy document wasn’t available. Exclusion wise there weren’t any surprising ones though without the actual policy wording hard to comment.
OnePath (33.5)
Fairly straight forward but they make doubly sure by making you know; Each Life Cover sum insured is only payable once per Life Assured. Covering the bases on the terminal illness claims, though the wording does say or…
- On the suicide clause doubly sure again with both self-inflicted harm and suicide in the exclusion wording.
Partners Life (35.6)
Simple no extras and no fluff. Of all the policy wordings I feel this is the easiest one for a lay person to read, even though the readability score is less than the best.
Pinnacle Life (43.4)
The definition for a claim is straight forward dies or terminally ill. Though the additional exclusions are a bit different.
- participation in base jumping, trans-ocean solo-sailing, caving, canyoning
- deployment in the armed forces/peace corps or as a journalist or news cameraman outside NZ, Australia, UK, Ireland, USA, Canada, Hong Kong or Singapore
SBS’s cover through southsure (38)
Simple definition and again we have some variation on the exclusions. Suicide is 36 months from the start of the policy rather than the usual 13 months, and this applies to the reinstatement clause too. Bit of a surprise there.
Additionally, the expected extras
- The Insured Person being addicted to or under the influence of alcohol, narcotics, or non-prescribed drugs or prescribed drugs if not taken as prescribed by a registered Medical Practitioner;
- If death occurs whilst taking part in any unlawful act;
- War or any act thereof, invasion, acts of foreign enemies, civil war, civil unrest, rebellion, revolution insurrection assuming the proportions of or amounting to an uprising, military or usurped power;
- Terrorism;
The addition of the term ‘addicted to’ makes this wording significantly wider in scope. Meaning an alcoholic could be excluded, as too a recovered alcoholic as the prevailing view is once an addict always an addict. The addiction clause is particularly concerning, as these things often happen after a significant event in some one’s life, initially as a coping mechanism, that gets out of control.
Sovereign (29.6)
Like ASB straight forward and simple, reasonably easy policy document to read as well even though the score suggests otherwise.
Westpac (36)
They have two covers the term cover policy and a flexicover policy. The term policy is along the same lines as the ASB policy, reasonably comparable to the adviser life cover claim terms and only has the standard suicide exclusion.
Interestingly their flexicover mortgage cover, is keyed directly to the mortgage, pays the amount of the mortgage. Which means that there is nothing provisioned for anything else and if you have no mortgage you have no life cover.
A disturbing application of life cover in our current environment. If you have Westpac cover make sure it’s not the flexicover, as it has some significant implications if you change your mortgage in any significant way, like transfer it to another bank or pay it off.
Summary
As you will have read not a particular endorsem*nt for any one policy. Other than the adviser based policies have less opportunity for the insurer to wriggle out.
Part of the reason adviser policies are like this, we don’t advise people to take policies when they have onerous terms. Unlike the bank and direct providers who are able to minimise their exposures with added exclusions, because there is very little advice given, if any at all, when these policy holders take out cover. Add to that my next comments on readability most policyholders don’t read the policy and don’t complain about onerous terms either.
Reading age and readability
What was interesting is the grammar testing I’ve done on the policies. In basic terms all except 1 required a reading age of about year 12, or a 18/19 year old. We’re told in business communications to keep it to a reading age of 7 to keep things readable. Though investigating this is that age 7 or 7 education years… either way that makes for a massive comprehension gap when you boil it down.
New Zealand’s reading age, from a Massey study in 2013, is suggestive of an average of 11 years, which is more than 7 in age and less than 7 in education years. This makes comprehension of insurance policies for a lot of people a difficult thing to really understand, including advisers as our tertiary education requirements aren't anything special against the population.
With a readability score of under 40 for most, this makes the job even harder. The target reading ease for writing is in the 60-70 range for a Flesch score. This blog has an age of 10.5 education years and a score of 51 which makes it easier than a policy wording to read but still harder than the desired averages.
The policy wording excerpts possibly don’t help the scoring of this blog, as my blogs seem to score around 9 education years, mainly as I’m talking about a technical subject.
Suicide Clauses
Back to the suicide clause. One of the only ones that is standard and consistent across life cover policies.
An interesting change that happened in the early 2000’s, in part due to a NZ coroner ruling, that the intention of a person at the time of their death could not be determined, this prompted a movement of policies from suicide exclusion for the first 13 months to one of intentional self-inflicted acts.
Reading something like this, <Insurer> will not pay any benefit under this appendix where the life assured dies or becomes terminally ill as a direct or indirect result of an intentional self-inflicted act (whether sane or insane) within 13 months of the risk commencement date or, if cover under this appendix has been reinstated, the date of reinstatement. This exclusion applies to any subsequent benefit increase you make.
What should concern those who have a life insurance policy and miss premiums, is every time the policy lapses (usually from 90 days of no payments), the 13-month suicide exclusion kicks back in. In the case of the SBS and south sure contracts this is 36 months, significantly longer.
Clearly this has been added after policy holders have reinstated lapsed policies and then taken their own lives. With this reinstatement clause, which was in place before I started in the industry, it has resulted in policy holders not receiving claim payments, don’t be one of them.
It might sound like a simple thing, but has significant ramifications, if there was to be a claim. I expect the reasons this happen is financial pressure both causing the policy lapse and the suicide. Potentially mental health issues of a depressive nature are also present, but haven’t been recognised, because there is so much going on. Yes, possibly blatantly obvious they took their own life, not to be crass there’s often a build up of factors too.
Where to from here?
Congratulations for getting through this!
If you got through all of this, and you’re not working with an adviser for your life insurance, you should be. You likely have exclusions on your policy you now know about and probably should be concerned about.
Give us a call or book some time for a chat about what is most suitable for you.
Many thanks to Quality Product Research for providing the sample policy wordings for the additional policy wordings with direct and bank suppliers.
The information is only intended to be of a general nature and should not be relied upon in any part without obtaining full details of the products and services by contacting Willowgrove Consulting Limited. All product and service details, terms, conditions and other information are subject to change at anytime without notice. Terms, conditions and fees apply to the various products and services and are available on request. A disclosure document will be provided to you on request free of charge.
Massey reading age information referenced from http://www.massey.ac.nz/massey/fms/Massey%20News/2013/8/docs/Report-National-Literacy-Strategy-2013.pdf
