4 things to know about insurance claims 2023

4 things to know about insurance claims 2023

This is always a key worry when people take out insurance: will this insurance actually pay out?

There is no point in denying it, the truth is that insurances sometimes don’t pay out. In this blog I’m going to talk through the reasons that things like life insurance, critical illness cover and income protection don’t pay out a claim.

But, I’m also going to show you how this is far less likely than you think.

1. Insurance claims 2022

Most insurers publish their claims statistics on an annual basis to show how much money they have paid out and how many successful claims they’ve approved. Here is an example:

Aviva

• Paid out over £1billion across their insurance offerings, that’s close to £2.9million every day
• 99.4% of life insurance claims were paid out
• 93.8% of critical illness cover claims were paid
• 95.7% of income protection claims were paid

2. I’m bound to be one of the 3% that don’t pay out

I remember saying this to someone in the industry and they were really surprised that claims stats could be looked at this way. Instead of seeing the amazing 99.4% life insurance payout, focusing upon the 0.6% and thinking that will be me.

We can’t avoid the fact that insurance doesn’t pay out some times and here are some reasons why.

The policy isn’t active

This is a more unusual situation but it does happen and it’s most likely if:

• The payments haven’t been kept up to date on the policy and it has been closed.
• The policy had a set end date and that time has now passed.

To explain this last one, there are times when a family member passes away and the family find details of an insurance policy. They can try to make a claim but don’t realise that the policy actually ended a while ago.

Misunderstanding the policy

Insurance is complex and it is full of jargon that doesn’t help anyone at all. You would be surprised at how much things massively change between life insurance and things like travel insurance, when it comes to terms and conditions. Here are some common examples:

• Thinking that terminal illness cover is critical illness cover.
• To make a critical illness claim you must have been diagnosed with a condition, at a specific severity, that you insurer offered when your policy started.

For the last one here let’s take a look at the diagnosis of a heart attack. Some insurers say that they will pay out for any diagnosis of a heart attack, some say that your heart attack needs to have reached a certain severity for them to pay out.

Non-disclosure

This is one of the biggest problems that people face when making a claim with insurance. For most life insurance, critical illness cover and income protection policies you need to answer a set of questions about your health and other things to get the insurance.

There are different types of non-disclosure and some of them won’t cause much concern to the insurer, but other things can lead to your insurance being cancelled. People can find difficulties in making a claim because:

• They have seen their GP about something relevant to the insurance application, but not told the insurer about it.
• At the point of claim the insurer asks to see medical evidence and finds details in the medical history that make it seem like the application was not completed truthfully.

Unfortunately there are many times that there are errors in medical reports. We have experienced medical reports saying that someone is diabetic, alcohol dependent or that their cancer was a much stronger diagnosis than they were told, and these were all errors. It is possible to have medical records corrected so that they are accurate, but it can mean that a claim is declined until things are sorted out. 

3. What about tax

Set up the right way an insurance claim payout for life insurance, critical illness cover and income protection should not be taxed.

There can be complications that can cause issues with tax when you look at business insurances, but I’m not going to focus on these here.

For personal insurance that you have taken out for yourself and pay for yourself, tax shouldn’t be an issue, if things are done in the right way.

So let’s look at some of the right ways:

• Life insurance – this really needs to be put into what is known as a Trust. A Trust means that your loved ones will get the money quicker and it keeps a payout away from inheritance tax calculations.
• Critical illness cover – in the majority of circumstances there are no tax issues for this kind of claim payout.
• Income protection – these policies are specifically set up to pay you a monthly income if you are ill and cannot work, and you do not need to pay tax on this amount.

4. It’s not just the money

With insurances we think about the money that we can claim, that’s the whole point of why we take them out. Life insurance, critical illness cover and income protection are all designed to give us money to support ourselves our family in difficult times.

But insurance is more than this now. There are lots of extras that you can claim through your insurance, that aren’t technically a claim. This can include:

• Access to video GP consultations 2/7
• Second medical opinion services
• Mental health support, and more

These extras are usually offered at no additional cost and are becoming a key area of competition for insurers. 

When it comes to insurance there are times that claims are paid and sadly times that it doesn’t. By using expert advisers like ourselves we can take you through the application process to make sure that you are getting the right insurance, that is going to deliver what you want it to.

Get in touch for a no obligation quotation today.

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