“My mother cancelled her life insurance due to financial reasons less than a week before she passed away unexpectedly. Despite her having paid her premiums for many years, the insurer is repudiating the claim saying that she cancelled her policy and was accordingly not covered anymore. Is this really the legal position?”
The general position is unfortunately that an insurer cannot be held liable to cover an insured if the insurance contract was cancelled. As always, regard must be had to the specific wording of the contract to establish if there are any notice-periods or other options available.
This was specifically considered by our Supreme Court of Appeal recently. In the matter of Discovery Life Limited v Hogan and Another, the insured had given notice to Discovery that she was cancelling her life insurance policy and had also ordered her bank to stop the final debit order from going off. Discovery had informed the insured that she had a 30 days notice period during which she would be covered, provided she paid her final premium. The insured refrained from such payment and made it clear that she did not want to have life cover during the final 30 days notice period. Accordingly, Discovery informed her that her life insurance had been cancelled as of the beginning of the notice period.
The insured subsequently passed away during the notice period, and her parents wishing to obtain coverage from her life insurance, made payment of the final premium to Discovery. Discovery however refused to pay out claiming that the contract had been cancelled and that the insured had not been insured when she passed.
The Supreme Court of Appeal reviewed the situation and confirmed that there had been deliberate repudiation by the insured which was accepted by Discovery, leading to the contract coming to an end. Accordingly, the later payment of the premium by her parents during the notice period could not help as the grace-period could not apply where the contract had been repudiated. Discovery, accordingly did not have to pay out as the insured was not covered.
In your mother’s situation it may therefore be important to determine if there is any grace period applicable and if such is still running. If there is, unless your mother clearly repudiated the contract, you may still be able to save the policy if you pay the premium. Our advice is to urgently seek assistance from your lawyer to review the contract and your mother’s prior instructions to her insurer to assess what your options are.