If you ask us, life insurance is one of the most important insurance products you will ever consider buying, because it is all about protecting the most important thing in the world - your loved ones.
Sadly though, when it comes to paying claims it is no secret that the insurance world has a bit of a reputation... and not a particularly good one!
Many hold the misconception that if they take out life insurance, a critical illness plan or income protection cover, the insurance company wouldn’t actually pay out if something were to happen. This can prevent people from purchasing the cover that they really need! How can we feel confident that our insurance company will stick to its promises in our most trying moments?
Well perhaps the stats will help, because contrary to the rumours, life insurers actually pay almost 100% of all claims!
This guide will dive into life insurance claims, dispelling any harmful myths that may be discouraging you from getting the insurance you need, and helping shed light on the inner workings of the claims process.
What is life insurance?
Life insurance, much like any form of insurance, is all about providing that all-too-important peace of mind; a level of certainty that everything’s going to be okay, whatever life throws at you. In short, it will pay out a tax-free lump sum of money if you die. It sounds a bit morbid, but, really it’s a very positive thing, because it’s there to provide a financial safety net for the people you love during a difficult time.
Critical illness insurance works in a similar way but it pays a lump sum of (tax-free) money if you fall ill with one of a number of serious illnesses, ensuring that, should you receive bad news about your health, you and your family won’t need to worry about the finances.
Last but certainly not least, income protection cover will replace up to around 70% of your regular income, should you fall too ill to work, meaning you can continue to pay all your bills, cover the cost of life’s little luxuries and maintain your savings. Basically it’s an insurance plan that removes any financial stress so that you can focus on what matters most, getting better!
Pretty powerful stuff, right? For some people, however, the belief that insurance companies always try to ‘wiggle out of’ paying claims can sometimes sadly distract from how awesome these products actually are. We hope that this guide will help to reassure you that there really isn’t anything to worry about, as the facts tell a very different tale!
Does life insurance actually pay out?
Research suggests over two-thirds of policy holders (68%)[1] believe that insurers will do whatever they can to avoid paying out in the event of a legitimate claim - yikes!
However, the latest facts and figures do not reflect concerns over payout rates, with 87%, 92%, 97% and almost 100% of claims being paid for income protection, critical illness, term life and whole of life insurance respectively in 2019[2] .
So, it seems there is a disconnect between what people believe and what is actually true. In reality, the answer is simple, insurance companies do pay out in the vast, vast majority of cases.
But we hear your cogs turning… what about the other few percent? In short, the single biggest reason for claims being rejected is people being dishonest in their application for insurance. But we will come on to that.
Will I definitely get a payout?
Where life insurance is concerned, it is actually pretty clear cut. If you pass away while covered by your policy, you will receive a payout.
There are a few cases where the cause of death may not be covered by the provider, such as someone taking their own life soon after taking out the cover or deaths relating to high risk or illegal hobbies. Generally though, it is pretty black-and-white.
Details of exactly what is and isn’t covered will be included in your new policy documents, but if you’re unsure you can always call our team of insurance experts on 03456 44 25 40.
For critical illness cover, there are a few more factors to consider that determine whether you qualify for a payout and how much money you will receive:
Is your illness covered by your plan?
Have you been left severely ill or disabled as a result of the illness?
Have you suffered from a pre-existing medical condition?
Do you have permanent symptoms resulting from the condition?
Has the illness been identified and verified by a medical professional?
For income protection, qualifying for a payout is a little more straightforward - you don’t need to hit a long predetermined list of possible illnesses, rather suffer with anything that would prevent you from being able to do your job. That could be a back injury for a builder or stress for a teacher.
Why would a life insurance claim be denied?
As we have already alluded to, the single biggest reason for claims being denied is incorrect or out of date information on the policy application.
When you apply for an insurance plan, you are asked to provide some information about your health and lifestyle, which enable the insurer to determine a) whether they are able to insure you and b) how much this cover will cost.
Insurance is not there to protect you against the inevitable, only against the risk of something maybe happening. So, if you apply for insurance cover stating that you are in full health when, in fact, you have already been diagnosed with a severe illness, then the insurer has every right to refuse your claim for a payout.
Similarly, if you say that you don’t smoke when you do, or hide the fact that you actually have a career juggling fire on top of skyscrapers with no harness, then you are providing false information to the insurer. If you lie on your application or fail to update them about a significant change in your circumstances, then you risk not qualifying for a payout. But that’s fair enough, right?
The bottom line is, understanding what your policy covers and what it does not, and being one hundred percent honest on your application for an insurance plan are the best ways to make sure that you will receive the support you need, when you need it.
Insurers want to pay out on all fair claims - we hope that the stats we have given here have reassured you of this.
Where can I get help with life insurance claims?
Here at Cavendish Online, we’re all about helping you find the right cover to support you and your family. In a world filled to the brim with myths and misconceptions, we can provide clarity around exactly what policies do and don’t cover, so you’re clear upfront on what would qualify for a payout.
We can also support you if you need to make a claim by:
Explaining more about your current life insurance or critical illness policies
Providing the best contact numbers for the relevant insurer claims teams
Explaining what additional benefits you have on your insurance policy which could help you or your family at a time of need
Helping you understand how your insurance plan has been set up and how you can go about making a claim.
Speak to the experts...
Give our advisers a call today.
Our team of friendly and professional advisers are on hand to help with any questions you may have regarding Life Insurance.
The advisers can also make recommendations tailored to your current situation and will research the market on your behalf, ensuring you secure the cover you need and supporting you every step of the way.
01392 436 193(Monday to Friday, 9am - 5.30pm)
