Life Insurance Claims Payout Myth

Why do some people think that life insurance companies will do whatever they can to avoid paying out what can be a substantial sum of money when they receive a claim following the death of a policy holder? On what basis do they come to that assumption?

All too often insurance companies come in for criticism when they refuse to pay out whether it be for life assurance, critical illness insurance, income protection insurance and health insurance to name but a few.

Legitimate life insurance claims will be met by life insurance companies

Your family can be assured that life insurance companies will payout for legitimate claims

You need to bear in mind that when you apply for life insurance you usually have to answer a number of questions relating to such things as your health, age, whether you engage in any hazardous pursuits, height and weight and occupation. A number of factors, including the answers that you provide, will dictate whether the life insurance company want to obtain further information about you and your health. In the later case, they may decide to write to your doctor and/or ask you to have a medical.

However, in many cases, they make their decision about providing you with life insurance on the information that you have provided on the life insurance proposal and that forms the basis on which they agree to provide the life cover. Therefore, it is vitally important that you answer the questions on the life insurance proposal truthfully and accurately.

If you deliberately provided the life assurance company with false information you leave yourself open to having your proposal declined without the policy even starting. If it does commence and you subsequently die during the term of the life policy and the life insurance company’s claims department find out that you have not disclosed relevant information about the likes of your health before the policy starts then they would be within their rights to decline the claim and not pay anything out. In which case the premiums that you have been paying, perhaps for years, would have been wasted and, worse still, your intended beneficiaries could struggle from a financial perspective as they would not receive the life policy proceeds.

Furthermore, why should policyholders who provide correct information potentially suffer because of those very few who do not disclose relevant information?

You may be interested in the following statistics that perhaps gives you some peace of mind that, as long as the information that you have provided to the life insurance company is correct, you need not worry about them paying out should you die.

Aviva, who are the largest insurance company in the UK, have recently provided the following information. In 2012, they paid out £475 million in respect of claims for life insurance, critical illness insurance and income protection insurance. The number of life insurance claims that they paid out against totalled 10,880 – that was 385 more than in 2011. About 99% of all life insurance claims were paid out with only 0.7% being declined because of non-disclosure on the part of the policyholder.