Is it a good idea to have separate policies for each dependent?

November 16, 2017

Are separate policies a good idea? Because when you take out a healthcare plan, who is the policyholder? Is it the person paying the premiums or the insured person?

Separate policies and An interesting Case

Separate policiesLegally speaking, it is the person who enters into the contract. In this instance, however, things are different.

A woman applied for funeral cover for both herself and her dependents. She did this through the call centre of the insurer. When the documents arrived, each dependent received a contract naming them as policyholders.

When she asked about this, they said she was only seen as the payer.  As a result, her details would not feature and the payout would not go to her.

What the Ombudsman Said –

The Ombudsman received the policy provisions and ruled that they were incorrect. The provisions defined the policyholder as the legal owner.

It also set out the terms of the cover. The policyholder, partner, children, parents and extended family are all covered under one plan.

The insurer answered that anyone could phone and take out insurance on someone without their knowledge. But it did not mean that the insured agreed to it or was even aware of it.

Part of their application process was to contact the people insured in the policy in order to confirm that they consent to the cover. If they do not consent, it was denied.

The Long and Short of It

The Ombudsman believed that the reason for obtaining permission in this manner was being misconstrued. While you could make a case for it being a sort of mandate allowing the person paying to act, it might not be.

The intention is also relevant. She had no intention of acting as the contractor in place of the others. She merely wished to ensure that she was listed as the policyholder on record on the lives of the others she was covering.

How it Turned out

The insurer was informed that unless the person who applies for the insurance had power of attorney or formal mandate, they must be regarded as the policyholder.

The insurer agreed that their interpretation may well have been flawed. They complied with the request to cancel all of the contracts and to refund the premiums paid and also interest.

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All info was correct at time of publishing