A survey by Britain’s biggest insurer, Aviva , has revealed that fewer than half of people believe a life insurance or Critical Illness policy will pay out when a claim is made.
Just 47% of people think that insurers pay this sort of claim, with a massive 86% of people believing that insurers will always try and avoid paying out.
There is clearly a widespread perception that insurance is worthless and that providers won’t pay claims. So, to debunk this myth, here are some facts that show that the vast majority of protection claims are paid.
98.3% of all claims paid in 2019
The life, income and health protection market in the UK is huge. Data shows that:
- There are 23.7 million protection insurance policies in place in the UK
- 2.5 million new collective and individual life policies were taken out in 2018
- There are 11.6 million members of group life insurance cover of some form in the UK
Figures from the Association of British Insurers (ABI) also reveal that providers have an exceptional record when it comes to paying life insurance, Critical Illness and income protection claims.
In 2019, insurers paid out more than £5.7 billion in protection claims in 2019, equivalent to 98.3% of all claims. This is the highest percentage of claims paid on record.
This includes over £3 billion in life insurance claims paid, equivalent to £15.8 million paid every single day.
The 2019 claims payment figures are:
- Term life insurance – 97.4% of claims paid with an average value of £77,535
- Whole of life insurance – 99.99% of claims paid with an average value of £3,465
- Critical Illness cover – 91.6% of claims paid with an average value of £67,573
- Income protection – 87.2% of claims paid with an average value of £17,729
So that’s the level of claims being made across the sector. But what about individual providers?
Life insurance claims payment records of the major insurers
Across the board, insurers paid the vast majority of life insurance claims in 2018 and 2019. Here are the specific figures from some of the UK’s top insurers.
In 2018, Royal London paid almost £174 million in life and terminal illness claims. 95.2% of term life insurance claims were paid, with an average of nearly £103,000 per claim. Terminal illness claims had an average payout of more than £156,000 with 89.4% of claims being paid.
More than £132 million was paid in whole of life insurance claims with 99.9% of the claims being paid. The average payout was more than £3,800.
In 2019, the UK’s biggest insurer paid more than £582 million to the families of life insurance customers who died or were diagnosed with a terminal illness. They paid a total of 16,363 life and terminal illness claims, equivalent to 98.6% of claims received.
In 2019, Aegon paid 96% of life insurance protection claims. Over the past three years, the insurer has paid, on average, 97% of life insurance claims.
In 2019, LV= paid 98.73% of all life insurance claims, equivalent to a total payout of £60.4 million.
AIG Life Limited paid out £92 million in life and Critical Illness claims in 2018, up from £73 million in 2017. The insurer helped over 1,500 individuals and families through this traumatic period.
Data published by AIG Life reveals it paid 99% of life claims in 2018, the same percentage as in 2017.
In 2019, from a total of 6,930 life insurance claims Zurich paid 6,732 claims – equivalent to 97% of all claims.
Vitality paid out a record £56.3 million in claims during 2018. The insurer paid 99.8% of life insurance claims, totalling almost £35.5 million.
In 2019, Legal & General helped a total of 10,721 people. The insurer paid 97% of all life insurance claims, equivalent to a total payout of £392.4 million and an average payout of £36,608.
Critical Illness claims payment of the major insurers
Overall, more than 91% of Critical Illness claims were paid in 2019. Here are some specific figures from the UK’s leading insurers.
In 2018, Royal London paid out £190 million in Critical Illness claims with an average payout of nearly £99,000. Overall, 91.2% of Critical Illness claims were paid.
The most common reasons for a claim were cancer (64%), heart attack (11%), stroke (8%), multiple sclerosis (4%) and children’s Critical Illness (4%). The average age of a claimant (excluding children) was 50 years old.
In 2019 Aegon paid 94% of Critical Illness claims. Over the past three years, the insurer has, on average, paid 94% of claims.
In 2019, Legal & General helped a 3,351 people with 92% of Critical Illness claims being paid. A total of £224 million was paid out, with an average claim of £66,857.
In 2019, Aviva paid £353 million of Critical Illness and children’s Critical Illness claims. This represents 4,957 claims – equivalent to 93.1% of all claims.
Data published by AIG Life reveals it paid 94% of Critical Illness claims in 2018, up from 93% the year before.
In 2018, Vitality paid 91.2% of Serious Illness Cover claims, totalling almost £20.4 million.
Why might an insurer not pay a claim?
While we have seen that insurers pay the majority of claims – typically over 90% of life and Critical Illness claims – there are some occasions when a claim will be refused.
The most commons reasons for an insurer to refuse a claim are:
- ‘Misrepresentation’ – this is where a policyholder had not been completely honest when completing the proposal form, or information had been missed off. For example, if you are not honest about your alcohol usage, or that you smoke, it can invalidate a claim
- Definitions not being met – this is where a specific definition in a policy terms and conditions is not met. An example would be a life insurance claim for suicide within the first 12 months of a policy (as many policies exclude this). Another example would be where a medical diagnosis does not meet a Critical Illness policy definition
What is a life insurance payout?
A life insurance payout is the sum of money received after a successful claim on a valid life insurance policy. Typically, this money is paid to a surviving spouse/partner or dependents.
Occasionally a payout will be made directly to the policyholder. This is where a life insurance policy includes terminal illness cover and the policyholder is diagnosed as having less than 12 months to live.
Does life insurance payout the full amount?
Yes. A life insurance policy pays the sum assured under the policy. It will never pay out just a proportion of the amount of cover.
It means that, is a successful claim is made, you can expect the full value of your life insurance policy to be paid to your dependents.
The one exception to this is if you pass away during the ‘waiting period’ of an over 50s plan. A ‘waiting period’ is typically the first 12 or 24 months of an over 50s plan that a policyholder must survive before a full payout is issued if death occurs of natural causes.
If you were to pass away during the ‘waiting period’, your dependents would typically receive either a refund of the premiums paid, or a percentage of the sum assured.
Get your life insurance or Critical Illness quote now
Despite public perception, the vast majority of protection policies pay out the sum assured. It means you benefit from the peace of mind of knowing that your family, home, or income are protected should the worst happen. Just remember to be completely honest on your application form.