Reasons life insurance won’t pay out

In the UK, 99.6% of life insurance claims are successful, however, there are a small handful of occasions when a claim will be declined[1].

These include:

  • Non-disclosure
  • Missed premium payments
  • Unsatisfied waiting period
  • Uncovered cause of death

At Reassured, we can help you not only secure the best deal but also fill in the application on your behalf, ensuring the highest possibility of a future claim being successful.

Simply get in touch today to make use of our FCA award-winning services.

Does life insurance always pay out?

No. As discussed, 99.6% of life insurance claims made in the UK are successful.

Whilst this does mean that life insurance doesn’t always pay out, it does mean that the likelihood is much higher than perhaps first thought.

However, this doesn’t take into account term life insurance policies which expire.

If your life protection is arranged on a term basis, it means that your cover will only last for a set period of time.

Therefore, if you outlive the term of your life insurance, a pay out won't be made.

Let’s take a closer look at the reasons a small minority of life insurance claims are declined…

1. Non-disclosure

The most common reason for a life insurance claim being unsuccessful is due to non-disclosure.

This refers to withholding details or providing misinformation at the point of application.

If upon your death it's deemed the information you provided wasn’t 100% truthful, the life insurance provider has the right to decline a pay out; highlighting the need to be open and honest when arranging cover.

It's a common misconception that life insurance companies will try to find holes within your application as a means of declining a pay out – this is not the case.

The most likely reason non-disclosure will become apparent is if your cause of death was as a result of a pre-existing medical illness you were aware of prior to application but didn’t disclose, or substance misuse you didn’t mention.

Most life insurance policies implement a contestability clause of 12-24 months from application, meaning that if you pass away during this period, your death can be investigated further.

This allows the life insurance provider access to your medical reports and autopsy results to determine if any non-disclosure took place.

Again, this highlights the need to ensure you provide as much truthful, relevant information at the point of application - something our award-winning team can help with.

2. Missed premiums payments

Missing a premium payment can result in the expiration of your life insurance.

Therefore, to ensure your life insurance is valid upon your passing, it's important to ensure all premium payments are up to date.

If you're unable to afford your monthly premiums or need to miss/delay a payment for any reason it's essential to inform your insurer immediately.

In exceptional circumstances, there may be support your provider can offer you to ensure that your life insurance remains valid.

If payments are missed, it's likely your life insurance will be cancelled and any future claims will be declined.

Having in place a waiver of premium benefit means that if you're incapacitated and unable to work due to illness or injury, your provider will keep your life insurance valid.

Usually, this requires you to have been away from work for a specified period of time (3, 6 or 9 months depending on the insurer) and premiums to be kept up to date during this period, for the waiver of premium to be activated.

If you were to pass away whilst a waiver of premium benefit is in play, your missed payments won't result in a claim being declined.

How much life insurance do you need?

Enter your financial commitments to understand the level of cover you require.

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£121,687 is the estimated average outstanding mortgage per household in the UK.

Our property is generally the largest financial commitment any of us will make.

Your life insurance should cover this significant debt should you no longer be around.

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According to Money Advice Service, full-time childcare in the UK now costs £242 a week.

The loss of a parent could result in the need for additional childcare whilst the surviving parent increases their hours to account for lost income.

Your life insurance cover should factor in this additional required outgoing.

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The average level of debt (minus a mortgage) in the UK is £15,385.

Factoring in any outstanding debts in your name when arranging life insurance ensures this burden is not passed to loved ones.

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You may wish to leave your loved ones an inheritance or lump sum gift upon your passing.

Factoring in the gift amount when arranging your cover will ensure the pay out amount will be sufficient to provide your loved ones with this selfless gesture.

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According to SunLife, the average cost of a UK funeral is now £4,417, whilst the total cost of dying is £9,493.

This is a 130% increase over the past 16 years and shows no signs of slowing down.

A significant cost which should be factored into the amount of life insurance you secure.

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If you are one of the 65% of the UK who are lucky enough to have savings, this could be used as protection if you were to pass away.

Any pay outs from existing life insurance policies and investments can also be used as financial protection for your loved ones if you were no longer around.

Factor this into your required cover amount.

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Your total cover estimate

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Let us find your best quote.

3. Waiting period

Some life insurance policies, typically over 50s plans, come with a waiting period.

This is a period of time at the being of the policy (usually 12 or 24 months) where you won't be covered if you pass away due to natural causes, (although all premiums paid to date will be refunded).

You'll still be covered for accidental death during this period.

For life insurance policies implementing a waiting period, passing away due to natural causes during this period of time will result in a claim being declined.

To determine the waiting period on your particular cover, please refer to the terms and conditions of your policy or contact your insurer.

It's possible to arrange life insurance with no waiting period clause.

At Reassured, we arrange policies with a number of different providers offering a variety of waiting periods.

4. Exclusions

When arranging life insurance, depending on your personal circumstances, some policies come with exclusions.

These will be detailed on a case by case basis and will require manual underwriting.

For example, if you suffer from Type 1 diabetes, it may be written into your cover that if the cause of death is directly linked to your condition or caused by a related illness, such as heart attack or stroke, your cover will not be valid.

If this is the case, a pay out will be declined on this basis.

Alternatively, some policies may also include exclusions if you were to take up residence within specific areas of the world.

Moving to these areas could result in your life insurance becoming invalid and a pay out being declined.

All exclusions will be explained at the point of application and it may be possible to ask for inflated premiums to ensure all causes of death are included.

Alternatively, if you're likely to have exclusions included within your cover, due to pre-existing conditions, at Reassured we work with a number of specialist insurers who are likely to provide more comprehensive cover.

Contact our team today to discover your policy options.

5. Suicide

It's often questioned whether or not life insurance covers death after suicide. The good news is, yes.

However, most life insurance policies will only cover death by suicide after the policy has been in place for a set period of time.

This is usually 12-24 months, depending on the insurer.

If the policyholder passes away as a result of suicide during this time, it's likely a pay out will be declined.

Read our article on life insurance after suicide to fully understand how death by suicide can affect a life insurance pay out.

6. Term expiry

As discussed, some life insurance cover only remains in place for a set period of time, a term.

If the policyholder doesn’t pass away during the term of the policy, cover will expire and death after this will not result in a pay out.

7. Terminal illness

Once you're accepted, contracting a terminal illness won't result in your loved ones being declined a pay out upon your passing.

However, most life insurance policies contain terminal illness cover as standard.

This means that if you're diagnosed with a terminal illness and given less than 12 months to live, you can make an early claim on your cover.

Unfortunately, terminal illness cover expires 12 months before the end of your policy, meaning that if you're diagnosed with a terminal illness during this period of time, you're likely to be declined an early pay out.

Although, your loved ones will still be issued a pay out once you pass, if you pass before the cover expires.

How long do you have to pay life insurance before it pays out?

With the exception of policies which implement a waiting period, your life insurance commences as soon as you're accepted.

Therefore, life insurance can pay out regardless of when you pass away following your start date, although, it's more likely providers will evoke the contestability clause the sooner your passing.

What if my life insurance claim has been declined?

Whilst it's rare, it may be that you've been declined a life insurance pay out and believe the decision was wrongfully made.

In this instance, initially, you should contact the life insurance provider and follow their official disputes/complaints process.

If this doesn’t result in the outcome you were hoping for, you can contact the Financial Ombudsman Service, who will review your case and come to a final decision.

Compare quotes for the best deal

As mentioned, if your cover is still in place, the likelihood of a claim being successful is high.

However, the cost of life insurance varies significantly, making it more important than ever to compare quotes.

At Reassured, we can discuss all your needs with you and help secure the best cover to meet your needs at no cost.

Get in touch today to obtain your free quotes.

Sources:

[1] https://www.telegraph.co.uk/money/consumer-affairs/long-does-take-life-insurance-pay/

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