Insurance is designed to provide financial support when you need it the most. If you suffer a loss, you need to know that an insurer is going to process your claim quickly, and that the cover you have will do what you expect it to do.
In the UK, the vast majority of insurance claims are paid. The Association of British Insurers (ABI) report that, in 2022, insurers paid 97.5% of all life insurance, income protection, and Critical Illness cover claims, totalling almost £7 billion.
Additionally, Statista reports that motor insurance companies paid out nearly £13.5 billion in claims in 2020.
So, when you take out insurance, you can generally be sure that you or your loved ones will receive support when it is needed. However, there are some instances where an insurance claim could be rejected.
So, to avoid the frustration and worry that could occur if your claim was declined, here are the most common reasons an insurer might not pay out.
Life insurance and health protection
Life insurance is designed to provide an income or lump sum to your loved ones if you die prematurely. It’s a vital part of your financial plan and ensures that those close to you can continue to meet their regular commitments and maintain their lifestyle if you’re no longer around.
In 2022, the ABI reports that 96.9% of all term life insurance claims were paid, totalling almost £4 billion. In addition, 99.99% of all whole-of-life insurance claims were successful.
Similarly, Critical Illness cover and income protection provide financial support if you are diagnosed with a serious illness, or you are unable to work due to ill health or injury. More than 9 in 10 Critical Illness claims were paid in 2022, while insurers paid 84.4% of all income protection claims.
These figures go to show that insurers overwhelmingly pay claims when they arise.
ABI Head of Protection and Health, Rebecca Deegan, says: “When you suffer a loss, fall ill or are badly injured, the last thing you want to be worrying about is your finances, especially during a cost of living crisis.
“That’s why the security that protection products can provide is so important. With another year of bumper figures and the vast majority of these claims being paid, it’s encouraging to see that individuals and their families continue to be supported through insurance.”
However, in a small number of cases, protection claims were not successful. There are three common reasons for this.
When you take out any sort of insurance – including life and health insurance – you have to provide certain details on your application (sometimes called the “proposal form”).
As well as basic details such as your name, address, and date of birth you’ll also have to answer some lifestyle questions. You’ll have to provide information about:
- Any medical issues you have had in the past
- Any current health problems (whether or not you have seen a doctor)
- Any medication you are taking
- Any surgery, operations, or procedures you have had
- Your occupation and the nature of your work
- Whether you engage in any risky or dangerous hobbies.
The information you provide will be used to determine the risk you pose to the insurer, and your premium will reflect this level of risk.
For example, if you smoke or vape then you will pay a higher premium – sometimes up to two or three times – than a non-smoker. So, you must declare this when you apply for cover.
If you don’t declare important information when you take out life or health protection, or you dishonestly answer any questions (for example, you claim to be a non-smoker when you do smoke) this is called “non-disclosure” and it means an insurer may not pay your claim.
The ABI say that half of all declined claims are because customers had not told their insurer key details about themselves or their circumstances when they took out the policy.
If you want to be sure that your life insurance, Critical Illness cover, or income protection will pay out, you must make sure that you answer all questions honestly, and provide all the information you need to on the application form.
That means declaring all previous medical conditions, the nature of your work, and any symptoms you have been experiencing even if you have not sought professional help.
- Failure to keep up with premiums
While it is possible to pay a lump sum for certain protection policies, most people pay for their cover through monthly premiums.
If you don’t maintain your premiums, your insurer will normally contact you and give you the opportunity to bring your payments up to date. If you don’t, after a certain period your cover will normally lapse.
Another reason why a life insurance or Critical Illness cover claim may not be successful is that the policyholder had simply failed to keep up the payments, and the policy had lapsed.
- A policy had expired
Most life insurance and Critical Illness policies are “term” policies. This means that the cover runs for a fixed period – for example, 10, 20, or 30 years.
These policies are designed to protect you for a specific risk – perhaps to provide support if you have younger children, or to cover a mortgage. If you are alive and well at the end of the policy, it simply ends.
Another reason that an insurer might not pay out is if you die outside the term of your policy. For example, if your term insurance policy ends on 31 December 2024, the policy won’t pay out if you were to die in March 2026.
An insurance payout can help you to get your car back on the road quickly or provide finance to buy a replacement in the event of a theft or a write-off.
Research published by Insurance Business has revealed the three most common reasons that UK insurers decline car insurance claims.
- Undeclared modifications
The study found one-sixth (16%) of claims were rejected partially or fully due to undeclared modifications on the vehicle, such as window tints or rear spoilers.
Car insurance expert Kevin Pratt says: “Car insurance policies are tightly written legal contracts with obligations on both sides. If you modify your car in any way – fitting tinted windows could be enough – then there’s a chance your claim on the policy could be rejected.
“If you do make a change to your car’s spec, it’s important to tell your insurer immediately – don’t wait until renewal.”
- Parking in a certain location
The second most common reason for a declined car insurance claim was parking in a location at a certain time.
For example, this includes parking on a driveway overnight after specifying the car would be in a garage.
- Using a car for business purposes
14% of claims were declined because a driver used a car for business purposes despite a social/domestic-only policy.
Get a life insurance or a Critical Illness quote online now
Life and health protection gives you the peace of mind that you and your loved ones will receive vital support when you need it.
And, as you have read, insurers overwhelmingly pay claims where an individual has provided accurate and honest information when they apply for cover.
We can help you find the right life insurance and Critical Illness cover for your needs.
Simply fill in a few details online and we’ll scour the market for you to find the cheapest premiums for the cover you need.
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