If you're considering purchasing life cover, it’s worth understanding the factors that can affect the payout of the policy. In this article, we'll explore the ins and outs of life insurance payouts, and help you understand why a claim could be denied.
What is a life insurance payout?
A life insurance payout is the amount of money that the policyholder’s family and/or loved ones receive in the event of their death. This sum of money will depend on factors such as the amount of cover and type of policy selected.
While not all policies guarantee a payout, some, like whole life insurance, are designed to ensure a payment. However, specific requirements must be met in order for this to occur.
Need to speak to an expert insurance adviser?
Can a life insurance claim be denied?
There are several reasons as to why a claim might be rejected by the insurer. For example, the policyholder provided false information on the application. Other reasons can be a result of:
Failure to disclose medical information
The insurer needs to be informed about any pre-existing conditions, medications, your medical history, recent illnesses or surgeries, and any lifestyle choices that could affect your health.
If you are not transparent and truthful about your medical history, the insurer may have valid reasons to deny your claim.
If you have any pre-existing medical conditions, e.g. diabetes, cancer, heart disease and high blood pressure, you may be denied insurance cover, or find that life insurance is more expensive. One reason behind this is that your life expectancy may be lowered as a result of these conditions.
This is where policies such as critical illness cover can be beneficial. Unlike life insurance, it doesn't cover you from death, instead it pays out if you’re diagnosed with a serious illness.
If you have a medical condition, please speak to our experienced advisers. They can help you determine which option(s) is available to you, and carefully guide you through the process.
Policy exclusions
Not all types of death are covered under life insurance. The most common exclusions include:
● Suicide: A payout may be denied if the you were to commit suicide within a certain timeframe (usually one year from the policy start).
● Murdered by a recipient: Policies typically prohibit payment if the deceased is murdered by a beneficiary (someone who stands to inherit money from the policy).
Lapses in premium payments
Your policy may be cancelled if the policyholder cannot make regular premium payments. Should a policy lapse because of missed payments, any claims made after the date of the lapse will not be paid out.
It is important to understand the details of your life insurance policy before you purchase it. Also, be aware of any changes or updates that could affect the cover.
If you are facing financial difficulties and can no longer afford your premiums, please contact your insurer as soon as possible to stop the plan from lapsing automatically. They may have a scheme that allows you to keep the cover.
Unsure of your options?
Surviving the policy term
Policies like term life insurance provide cover for a specific period, known as the “term”. If you survive past the end of your term, your life insurance policy will expire and no longer be in force. As such, it will not pay out any death benefits.
Whole life insurance policies, on the other hand, are designed to provide cover for your entire life. There is no policy term, so the policy will remain in force until you die, or no longer need it.
Please note: The insurance products offered by Cavendish Online have no cash-in value at any time. If you stop paying your premiums, your cover will stop, your policy will end, and you will receive no benefit. If you have not claimed before the end of your chosen policy term, the policy will end, and no benefit will be paid.
If you are facing financial difficulty, please contact your insurer before cancelling your policy or letting it lapse. They may have options available that means you don't have to lose the plan.
Death during moratorium period
Some policies have a moratorium period - a waiting period - when the policy first starts. This is typically two years from the start of the policy. Such policies include non-medically underwritten policies, like Over 50s life insurance.
During the moratorium period, the insurer would look to exclude any pre-existing conditions.
Interested in speaking to an adviser?
Who will the payout go to?
When you pass away, the death benefit from your policy will be paid to your beneficiaries. These are the people that you designate when you apply for life insurance. Typically, it involves dependants like close family members, spouses or children.
They can use this money to help cover final expenses, pay off debts, or maintain their lifestyle. Make sure you are clear about who your beneficiaries are and update them regularly regarding any changes.
Why is it taking so long to get life insurance money?
A policy can take some time to payout (from days to months). In this time, insurers need to review the circumstances of the policyholder’s death and verify their identity before releasing any funds.
When making a claim your insurer may require:
● The policy number
● Personal details of the policyholder/beneficiaries
● Death certificate
● Proof of identity
● Copy of the policy document or certificate
Apply for life insurance in as little as 30 minutes
Here at Cavendish Online, we’ll help you find affordable quotes for life insurance. By providing the necessary information, we can make informed decisions about which policy is right for you.
Once you've answered some questions about your lifestyle and health, cover may be arranged in as little as 30 minutes. Our advisers can take any medical information provided to get an idea of what kind of policy you're looking for.
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 43 61 93(Monday to Friday, 9am - 5.30pm)
Request a callback
