Does Insurance Payout?

The most common question Proadvice get from our clients and prospects is: “Do insurance companies actually pay out?” And that’s a great question. You see, the fear people have – and maybe you have it too - is that you’ll pay all this money into a policy, and when it comes to the crunch the company will look for any reason not to pay out.

Maybe you’re concerned they’ll look into your past history and find any illnesses or accidents as excuses. Maybe you’re concerned about the exclusions in the small print. Or maybe you’re just a bit sceptical about insurance companies as a whole.

But the short answer – and it might surprise you – is  YES... all of the major insurance companies will pay out in the vast majority of cases. It’s our job as advisers to ensure your policy is water-tight and guarantee you’ll get a payout if anything were to happen to you.

It is a common misconception that insurance does not pay out and this is not the case. Unfortunately, bad news travels faster than good, so for all of the stories in the news and online of insurance cases not paying out, these generally are only the stories you hear about and not the ones that do. This is far from ideal as it changes people’s perception of the insurance industry and may prevent someone who may need protection to not take a policy out. The real statistic of this is that life cover pay-outs in 2012 honoured 98% of claims and £6 million a day was paid out in the UK for protection (1). The insurance industry is an industry that wants to pay out. 

1. https://www.abi.org.uk/News/News-releases/2013/05/Insurers-pay-out-6-million-every-day-to-help-families-deal-with-death-serious-illness-or-injury

By knowing about the insurance market, claims statistics from insurers, amendments and upgrades to policies your Proadvice adviser can guide you to the best insurance provider for you. If there is an unavoidable amendment to the plan, i.e. because you happen to have a dangerous hobby, such as sky diving at weekends, then your Proadvice adviser will explain what the changes to your plan are and what you can expect from the plan during a claim (should the situation ever arise where you need to do so), before you agree to start the plan. It is certainly better to be armed with all the facts before you start the plan than to find out later down the line that you are not covered when trying to make a claim.

What types of Life Insurance are available?

Life insurance is available to many people. The first thing that people often choose is the amount of the life cover they wish to be insured for. This is referred to as the sum assured. You can choose as much or as little as you want in respect of your sum assured, however some insurance companies do have minimum and maximum levels that can be selected. This differs from each insurance company to insurance company. The amount you select is down to your individual circumstances you can select just enough to cover your mortgage or even 25 times your salary in order to protect your family. It is your choice and is based on your circumstances, requirements and of course, affordability.

A life insurance policy can be set up as a level term plan; this ensures that the policy will pay the same sum assured on day one as it does on the last day of the plan. You are able to select or can add an increasing option to your policy which means that your premiums increase every year in line with the Retail Price Index, (RPI) and therefore the sum assured pay-out will be equal in value to today’s figure and safeguards your plan by the effects of inflation. 

The cheapest option available is the decreasing plan which is often taken out in conjunction with a mortgage. With a decreasing plan the sum assured decreases in line with your mortgage ensuring there is always enough money to clear the mortgage in the event of your death.

There is in addition to these choices also an option to have the money paid monthly to the beneficiary. This is called a Family Income Benefit. The family income benefit plan is designed to provide your loved ones with a monthly payment amount, tax free to cover the bills and living costs. Some people use their family income benefit plan as a way to replace their salary should they pass away. This also prevents the worry and temptation of budgeting with a lump sum pay-out as the money will be paid as a monthly amount and will continue to be paid out until the end of the plan.

If you are taking out a life insurance plan with a partner you can choose whether you wish to have a joint plan or two single plans. Joint plans will only pay out the sum assured on first event, which means that the policy will pay out when the first person in the joint plan passes away. The insurance policy is then finished so if you were in a joint insurance plan and your partner was to pass away you would also lose your life insurance cover once the plan had paid out. By having two single plans if your partner died you would still have your own insurance plan in place and in many cases, the cost of two single plans is almost the same as for a joint plan. 

With life insurance cover you can choose how long you want your life insurance plan to run for. This is referred to as the term of the plan. The longer the term you choose for your life insurance plan, the more expensive your plan is going to be.

It is a common belief and quite probable that the older you are, the more likely you are to die. This will be reflected in your premium and if you cancel your plan or live longer than the term you selected, there will be no money paid back to you as this is not an investment plan and your policy will have no cash in value. As most life plans no longer have investments attached they are currently now cheaper than they have ever been.                                                                                          

There is an option to have a ‘whole of life’ cover on your life insurance policy. These policies as they depict, will run for the whole of your life or until you cancel the plan. With these whole of life plans you could pay more in to the insurer than the potential pay out may be at the end of the policy. This is relative and completely dependent on how long you live for.

New Parent FREE Life Cover

Having a baby is one of life’s most amazing gifts; it is also often as wonderful as it is chaotic. Your priorities will suddenly completely change and this is often another time in life, other than taking out a mortgage that people deem it necessary to contemplate taking out a form of life insurance cover to look after their new family. There is a unique life insurance plan on the insurance market for new parents that is completely FREE, please contact your Proadvice adviser today to put this policy into place.

New parent, free life cover offers the following benefits;

  • £10,000 of free life cover for each parent from the day you apply until your baby's first birthday. This could mean you will get £20,000 to protect your family if both parents are to apply and will pay out £10,000 if a covered parent dies on or before their baby's first birthday.
  • You can take out this plan once your baby has been born and before they are twelve months old
  • No payment is needed and we will not request your bank account or credit card details
  • This policy will only take a few minutes to apply and you will receive confirmation that your family are protected almost immediately 

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