Payment Of Funeral Benefits to Nominated Beneficiaries.

This is a reminder of recent changes made to the Insurance Act with regards to the payment of funeral benefits.

Helfin would like to highlight that the definition of “beneficiary” as contained in Schedule 2 of the Insurance Act 18 of 2017 (the Act) requires group policy benefits such as unapproved group life and funeral benefits, provided under a group insurance scheme, to be paid only to a “beneficiary” as defined in the Act. This means that the legislation that previously allowed beneficiaries to be determined by the employer i.e., the ’employer discretion” is no longer allowed.

This effectively means that insurers are now only permitted to pay unapproved death and funeral benefits to the employees’ nominated beneficiaries and in the absence of a valid beneficiary nomination form, to the estate of the deceased employee. If an employee has not nominated a beneficiary to receive their death or funeral benefit, the insurer has no choice but to pay the relevant claim amount to the employee’s estate.

The payment of funeral benefits to the deceased employee’s estate is especially problematic, given that the intention of group funeral insurance is “to cover costs associated with a funeral or the rendering of a service on the happening of a death event”, as described in Table 1 of Schedule 2 to the Act.

Payment to the deceased estate will result in the employee’s family being unable to use the benefit to pay the employee’s funeral costs, due to the delays experienced in settling the estate. This could potentially cause hardship and trauma to the employee’s family at their time of greatest need.

Important information for you, as an employee, to know:

In terms of legislation, funeral benefits must be paid by the insurer to a nominated beneficiary in the event of the employee’s death, or in the absence of a valid beneficiary nomination form, to their deceased estate.

 This means that should you, as an employee, not have completed a valid funeral insurance beneficiary nomination form before your death, your funeral benefit will be paid to your estate and your family will not be able to utilise the benefit for its intended purpose, namely, to assist your surviving family members with payment of funeral costs.

Ensure that, as an employee, you:

  • Know where to obtain the funeral insurance beneficiary nomination form template.
  • Remember to nominate a beneficiary in respect of your funeral benefits and to update beneficiary details as at important life events, such as marriage, divorce, birth of child, death of beneficiary, etc.

Your employer must supply the relevant nomination form to your broker/provider on submission of an employee’s funeral claim.

Please ensure that a separate valid nomination form in respect of your group funeral insurance is completed, as the beneficiary nominations in respect of your retirement fund and unapproved group life insurance benefits will not be accepted by your provider for payment of the funeral benefit. Please also note that:

  • As an employee, you may not nominate your employer, the Fund or association (where applicable) as the beneficiary of your funeral benefit and the insurer is not allowed to pay the funeral benefit to your employer (in terms of the Insurance Act).
  • Providers are therefore not able to refund any advance benefit payments made by your employer.
  • As an employee, you should preferably not nominate a minor child as a beneficiary, for funeral benefits.

Information provided by Liberty Group Limited

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