According to internal data from Reassured, the average cost…
Since 2017, life insurance claims have remained consistent, with insurers paying out around 98% of claims.
Despite strong payout statistics, there’s a common myth that life insurance providers don’t payout.
In this article we'll explore payout rates from some of the UK’s leading providers, while providing all the information you need to know about life insurance payouts.
Keep reading as we cover:
Reassured are an FCA-regulated life insurance broker who can help you compare quotes from top UK insurers free of charge.
We can help to compare quotes from providers who have high payout rates.
Why not get in touch for your personalised, fee-free and no-obligation quotes? Best of all, life insurance through Reassured starts from just 20p a day † .
A life insurance payout refers to the sum of money that is paid to a beneficiary upon the death of a policyholder.
In simple terms, it’s the amount of money that will be paid to loved ones if you pass away while your policy is valid.
Occasionally, the payout may be paid directly to you if a terminal illness or critical illness cover claim is made.
Payouts will be made to a UK bank account and, typically, will be in the form of a lump sum.
Life insurance payouts aren’t tied to any specific financial commitments, meaning loved ones can spend them how they see fit.
Often, life insurance is taken out to help protect certain expenses to ensure these can be paid for after your passing.
Ultimately, a payout from a life insurance policy can be used to help ease financial stress for your loved ones.
Why not input your financial commitments into our handy calculator below to work out the life insurance payout required to cover all costs for your loved ones?
Each life insurance policy type will have its own payout rate.
While the overall industry payout rate is 96.9%, this percentage will be made up of each policy types payout rate.
Term life insurance provides cover for a set period of time and can be taken out with a level or decreasing payout.
In 2022, 96.9% of term life insurance claims were paid out - totalling £3,907,342,000.
Whole of life insurance provides lifetime cover. As a result, a payout is guaranteed to loved ones.
In 2022, 99.9% of whole of life claims were paid out - totalling £863,752,000.
Income protection insurance can payout up to 70% of your usual earnings if you’re unable to work due to illness or injury.
2022, 84.4% of all income protection claims were paid out - totalling £778,564,000.
Critical illness cover can payout a lump sum if you’re diagnosed with a specific illness (that’s listed within your policy terms).
In 2022, 91.6% of critical illness claims were paid out - totalling £1,274,111,000.
Reassured can help you compare a range of policies to help you find your ideal cover solution. Simply get in touch.
The table below shows some the UK’s best life insurance providers based on their most recent payout rates:
|Provider||Payout rate %|
This information has been taken from each providers website and is correct as of 12/06/23
As you can see from the table, payout rates vary significantly between the different providers.
This is because each insurer will have their own terms and conditions and their own criteria for assessing claims.
Many believe that the provider with the highest payout rate will be the best life insurance provider.
However, payout rates are just one factor that should be considered when finding the right insurer.
The most important thing is finding the cover that really meets your needs, at a price within your budget.
A life insurance payout will be released to the intended beneficiary upon a successful claim.
A payout can only be issued after a claim has been made.
The claims process can vary between providers but, as a general rule, it can be as simple as:
Don’t know who to claim with?
It’s not uncommon for a loved one to pass away without providing any information about their life insurance policy.
The register of consolidations, provided by the Association of British Insurers (ABI) can provide you with information on whether your loved one held a life insurance policy and who with.
We have a dedicated how to find out if someone has life insurance article for more information »
Yes, life insurance payouts can be subject to inheritance tax as the payout sum will form part of the policyholder’s estate.
Inheritance tax is charged at 40% on anything which takes an estate over the value of £325,000.
As an estate is made up of property, possessions and money, it’s not hard for it to exceed this amount.
Writing a life insurance policy in trust can help to avoid/minimise inheritance tax by detaching it from your estate - allowing loved ones to receive a full and fast payout.
The average life insurance policy varies depending on the policy type.
For example, as of 2022, the average payout rates for term life insurance and whole of life insurance were as follows:
|Life insurance policy||Average amount paid out|
|Term life insurance||£73,578|
|Whole of life insurance||£4,054|
Term life insurance is often taken out by young adults who want to help protect family living costs and/or a mortgage. Therefore, a larger sum assured is often required.
Whereas whole of life insurance is more commonly taken out by those later in life, who have paid off their mortgage and have grown up children.
By taking out a whole of life policy they can help cover their funeral costs or provide an inheritance.
Compare multiple life insurance policies through Reassured to find the right option to meet your needs.
Typically, it can take up to 30 days for the funds from a life insurance policy to be paid out.
This will be 30 days from the claim being assessed and deemed as valid.
In order for a claim to be valid:
If issues are found with any of the above, while the claim is being assessed, there may be a delay in the funds being paid out.
If payments aren’t up to date, it’s found that false information was provided and/or your cover isn’t in date, insurers can deny a payout.
Payouts can be delayed if the insurer needs to gather more information about the claim and/or the person who’s passed.
There are certain clauses that can be written into a life insurance policy to allow insurers to investigate the claim if it seems suspicious. These include:
Please note: the clauses that are written into policies and their time scales will vary between the different providers.
Additionally, if the policyholder passes away as a result of homicide, the payout will be delayed until any policy investigations have ended and a verdict has been reached.
In an ideal world, every life insurance provider would have a 100% payout rate. However, there are some instances where a payout can be denied.
Please note: due to the varying underwriting processes used, the reasons for not paying out may differ between each insurer.
For more information, why not read our complete when does life insurance not payout guide? »
Does life insurance pay the full amount?
Yes, the full sum assured will be paid to your loved ones upon a successful claim being made.
The exception to this is with decreasing term life insurance, where the sum assured will reduce throughout the policy lifetime.
What is the highest life insurance payout?
It’s possible to take out life insurance with a payout sum of £1,000,000 through Reassured.
However, this level of cover is likely to be unnecessary for most.
The amount of cover you take out should simply be enough to help cover your financial commitments.
When do insurers payout?
Insurers will payout after the policyholder has passed away and upon receipt of a successful claim.
This could be within 30 days but it’s possible for delays to arise if the insurer needs to gather more information.
Will the payout be a lump sum?
Yes, in most cases, life insurance is paid out as a lump sum.
The exception to this is family income benefit, which will payout to loved ones in monthly instalments (like a regular income).
After your passing, loved ones will receive monthly payments for the remainder of the policy term.
If you have a policy with a 30 year term, and pass away 10 years into the policy, your loved ones will receive payments for the remaining 20 years.
This is an ideal option for those with young families who want to help protect their daily living costs.
Is a life insurance payout guaranteed?
A life insurance payout is only guaranteed with whole of life insurance and over 50 life insurance, as these are forms of life assurance.
As term life insurance lasts for a specific period of time, it’s possible for you to outlive the policy. As a result, the payout isn’t guaranteed.
All information given at the point of application must be correct for a payout to be guaranteed.
Who gets the life insurance payout?
Generally speaking, a life insurance payout will be made to one of the following:
Naming beneficiaries and/or writing your life insurance in trust allows you to have greater control over who the funds are paid to.
What happens to a life insurance payout with no beneficiary?
When no beneficiary is stated on a life insurance policy, the payout usually goes to your next of kin.
The payout will form part of your estate of the deceased and will undergo the same processes as other assets - this includes going through the probate process and being subject to inheritance tax.
The proceeds of estate will then be distributed as stated in your will. If there’s no Will present, again, it will fall to your next of kin.
Can I receive an early life insurance payout?
Yes, while it’s commonplace for the funds from a life insurance policy to be paid out after your passing, there are certain scenarios where you could receive an early payout.
Life insurance with critical illness cover starts from just £10 a month through Reassured. Simply get in touch for your free quotes º .
Does the payout stay the same no matter when you die?
Typically, the payout sum will remain the same throughout the policy lifetime. However, there are few circumstances in which the sum may change.
The sum paid out to your loved ones can change if:
Reassured offer life insurance policies that include the special events option, so why not speak to a friendly member of our team about guaranteed insurability?
While payout rates help to give a good indication of whether an insurer is likely to payout or not, it’s not always the most important thing to consider.
The most important thing is that your policy covers your financial commitments and is at an affordable price.
Reassured can help you compare quotes from some of the UK’s best providers, as well as smaller specialists.
A friendly member of our team can also talk through your needs to help you find a payout amount that’s right for your circumstances.
Our quotes are personalised to your needs, fee-free and completely without obligation.
Best of all life insurance through Reassured starts from just 20p-a-day, so why not get in touch?
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