Protection insurance claims. How, when and why?

Last month we had a blog all about enhanced underwriting, following on from that we are now going to run through claims.

A lot of other types of insurance get a bad rap for not paying claims, and it can even put people off taking out certain policies. Thankfully, that isn’t the case with protection insurance as these claims are much more likely to be paid out than claims for other types of insurance, with 98% of claims being paid in 2020. 97% of life insurance claims and 99.99% of whole of life claims were paid totaling over £4,378,000,000 (ABI, 2021). 

Why would I make a claim?

There are different types of protection insurance which you can get, so the reasons why you might claim can be different. For a life insurance policy, a claim would be made in the event of your death and the benefit amount would be paid to your next of kin, or a beneficiary that you have named within a Trust.

If you have a critical illness policy, you would make a claim if you were diagnosed with one of the listed critical illnesses. There are a few terms and conditions that come with a critical illness policy which you should be made well aware of when purchasing the policy. For example, some insurers require you to have been diagnosed with a certain severity of the condition.  For a standalone critical illness policy there is also a survivability period, which means that you need to live a certain amount of time from diagnosis for a claim to be successful (usually between 14 and 28 days). This is why it can be a good idea to combine this policy with life insurance, as it will automatically transfer to a death claim if you do unfortunately pass away. 

When a critical illness policy is claimed on, this money would go directly to you (unless you say otherwise within a Trust) and can pay for things such as paying off your mortgage, changes to your home, any loss of income or towards private medical insurance. Hopefully you would have extra insurances that would cover these last two areas more specifically i.e. income protection and private medical insurance.

An income protection policy could be claimed on if you are having to take time off work due to ill health. The amount you receive will have been set out when you purchased the policy and is usually inline with a percentage of your monthly income e.g. 65% of your gross earnings.

Life insurance does not usually come with exclusions based upon your circumstances, but it will often have an initial 12 month suicide exclusion as standard. With income protection and critical illness cover, there can be exclusions added depending on your circumstances when you take out the policy.

Examples include:

• A cancer exclusion on critical illness cover, if you have experienced this in the past.
• A mental health exclusion on income protection, if you have a history of anxiety or depression.
• An exclusion for a hazardous sport such as rock climbing on income protection or critical illness cover
  
  

These exclusions might be offered but they might not, it’s always worth asking and seeing what is available. Also, what one insurer offers could be completely different to another.

How do I make a claim?

The process of making a claim is usually quite straightforward, though it might not feel that way when you are in the middle of what is likely a very difficult time. 

Depending on the type of policy you have, you or somebody on your behalf will let the insurer know that a claim is going to be made. The insurer will then look at the circumstances of the claim, and sometimes request documents to support the claim. This could be a medical report from your GP if you have been diagnosed with a critical illness, a death certificate in the event of your death, or a sick note from your doctor if you’re unable to work for a period of time.

When you are our client we help you and your family in the event of a claim, taking away as much of the stress and procedural side of things as possible, so that you can focus on what is most important: you.

When wouldn’t a claim be paid?

There are a few instances where claims aren’t paid, but as mentioned before 98% of claims were paid in 2020. Meaning that it’s only 2% not being paid, which certainly isn’t a lot. We do appreciate though that for that 2% of people the claim not being paid will be an incredibly negative experience.

When you apply for protection insurance, it’s important to disclose everything fully, as this is one of the more likely reasons an insurer wouldn’t pay a claim. The difficulty with this can come when an insurer accesses your medical records to support a claim. When a claim is turned down this way it is usually because someone has failed to mention something to the insurer during their application that was important, or it can be that the medical records that the GP holds about you are incorrect. Insurers do understand that people might not remember everything accurately or fully understand medical diagnoses that they have been given, and where possible they do what they can to support a claim despite this.

A policy would also not be paid if the reason behind the claim related in some way to an exclusion which has been added to the policy. For example, if you have an exclusion related to breast cancer on a critical illness policy then the insurer would turn down a claim for breast cancer in the future. Life insurance usually has a 12 month suicide exclusion in the first year and the insurer will not pay a claim if this situation occurs.

With an income protection policy, you must be off work for a certain time period before being able to claim. Whilst you can notify the insurer of your likelihood to make a claim you would not receive financial support until after your ‘deferred’ period, which is often between 4 and 13 weeks, depending upon how your policy is set up . Income protection policies will stop paying a claim once you return to work, but it’s important to know that they can pay partial claims to support you whilst you return to work and build back up to full-time hours if you are able to.

We’re here to help

Though there are times where a claim hasn’t been paid, the majority are successful, so please don’t let that put you off. If you have used an adviser such as those here at Cura, we are here to help every step of the way as much as we possibly can. Our clients are our priority, from the first conversation and throughout the entirety of their policy.

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What are the benefits of enhanced underwriting?

Fees and commission, what are they?

Advised and non-advised, what do they actually mean?