Payout rates: Much better than most people think
Research from a range of sources, including Association of British Insurers (ABI), Pacific Life Re, as well as insurers AIG, Legal & General and SunLife indicates there’s a sizeable gap between customers’ perception and the reality when it comes to payout rates.
Whereas more than 80% of people think insurer payout rates are less than 80%, the reality is this figure is 98%.
In a 2017 report from Pacific Life Re when customers were asked why they think insurers decline claims, 58% answered ‘due to the policyholder not providing accurate information when they bought the policy‘.
Perhaps more worrying for us in the life insurance sector, 17% replied ‘insurance companies always try to avoid paying out.’ A further 9% cited ‘loopholes‘ or ‘insurance companies being too profit driven in general‘.
Contrary to these findings, the data indicates that insurers are not reluctant to pay out on life insurance claims. However, this misconception is believed by a significant proportion of the UK public.
The importance of having life insurance (and disclosing all information)
Did you know that 1 in 4 breadwinners in the UK don’t have a life insurance policy in place? What’s more almost half of parents don’t have any form of life cover.
This results in an astonishing estimated cover gap of £263 billion across the UK.
The 2% of declined claims are mainly as a result of non-disclosure. Meaning the policyholder wasn’t completely transparent with all their details during application.
In summary, many in the UK don’t have life cover in place, potentially leaving their loved ones exposed.
It’s also clear that it’s vital to disclose all the correct information on the application in order to maximise the chances of a successful claim.
Misconceptions are common, (make sure you know the facts)
It’s clear that many in the UK are unsure of the cost of life cover or whether insurers even pay out.
These common misconceptions could play a part in why ‘8.5 million people are without‘ life cover. Many of us are also confused about the cost of life insurance premiums.
SunLife suggest ‘that 47% of people have no idea how much life insurance costs‘. As well as, ‘people overestimate the cost of insurance by 394%‘.
If you have dependants, who rely on you financially, or have a mortgage with your partner then having life cover in place can provide much-needed security and peace of mind.
Your mortgage could be cleared allowing your family to remain in their home. Outstanding debts could be paid off. Children could receive an inheritance to set them up in adulthood or fund university.
We believe it’s vital for the vast majority of us to have adequate life insurance protection in place. Therefore we’re passionate about the UK population having a greater understanding of the true figures.
Life insurance claim process
Coping with the death of a loved one is undoubtedly one of the most stressful things any of us will have to experience.
Life insurance is designed to reduce the financial burden that’s felt when a loved one passes away. However, in order to benefit from this financial windfall, a successful claim must be made.
Most insurers understand that complicated paperwork is the last thing anyone needs at this difficult time and they have made their claims process pretty straightforward. Some now offer online claim forms too.
The standard claims process
Claims processes can vary from one insurer to another, but as a general rule:
- Contact the insurer to make them aware you wish to make a claim
- Receive the claim pack in the post or via email
- Fill in the details and provide the required documentation, (death certificate, claim form, policy document)
- The insurer usually requires original copies of these documents
- Send them by registered post to avoid any losses
- Receive payment either directly or as part of the deceased’s estate.
When to claim and who to contact?
- It’s important to notify your insurer as soon as you can, to start the claims process promptly
- The longer you leave it, the longer you’ll have to wait for a policy payout
- You can find the contact details of your insurer on your policy documents or their website
- Some insurers now provide an online claims form, meaning you might not have to even speak to anyone.
How long before beneficiaries receive a payout?
- The time it takes, between making a claim and receiving payment will depend on how the policy was set up
- If the insurance belonged to the deceased, then the payout will form part of their estate and be subject to probate
- This means that any payout will only be distributed once the executor’s capabilities have been confirmed, and the will executed
- Usually, an insurer is prompt in paying out, but the probate process can lengthen the time it takes to receive funds
- If there’s no will left by the deceased, probate can take longer still
- If the value of the estate exceeds £325,000, you’ll pay 40% inheritance tax on all or part of the payout
- The best way to speed up payment and avoid paying a large amount of inheritance tax is to write your policy in trust
- This means that the payout is held by nominated trustee/s, until such time as the policyholder passes away
- The policyholder needs to write the policy in trust and this cannot easily be changed once they have died.
Be a hero – secure your life cover
Taking out a life insurance policy to protect the financial future of your loved ones is a selfless and truly heroic act.
Life cover is probably cheaper than you would expect. Depending on your individual circumstances it’s possible to secure cover for less than 20p-a-day.
The best way to lock in the lowest premiums is to take out cover while you’re still young. The best way to get the best price is to compare quotes, (or get a broker, like Reassured, to do it on your behalf – for free).
Now we have dispelled some of the myths surrounding life insurance, why not seize the day and secure cover?
Then get on with the more enjoyable things in life, like enjoying the family, safe in the knowledge you have safeguarded their future.