How can I ensure that a life insurance claim gets paid?
Life insurance is there to provide your loved one with financial security in the event of your death. In the majority of circumstances a life insurance claim can be paid out with no issues. However there are some circumstances that could make your life insurance policy invalid.
Before you take out a policy, here are some points to consider. This will ensure that when the time comes, your family can make a successful life insurance claim.
Be honest on your application
One of the most common reasons for insurers not paying out on a life insurance claim is fraud, or non-disclosure.
When filling in your application, make sure that you take time to read the questions carefully. Fill in the answers truthfully. You may believe that lying about your health or lifestyle might get you a cheaper premium but it could actually void your entire policy.
You should disclose any pre-existing health conditions. Whether or not you are a smoker and if you participate in any high-risk hobbies. If you die from something that is connected to any of these – and it comes to light that you have lied on your application – the insurer is highly likely to refuse the claim.
Insurers may not pay out if you take your own life
Many life insurance providers have a “suicide clause.” This means that if the policyholder takes their own life within the first 12 or 24 months of taking out the cover, a claim cannot be made. This clause is there to prevent people taking out a large policy with the aim of getting their family out of debt. If a suicide occurs after this initial period, then an insurer should payout. However the claim may still be rejected if the policyholder has withheld information about their mental health.
It is worth noting that some insurers may pay out early, if you develop a terminal illness. This is usually classed as an illness where the prognosis is less than 12 months. Claiming early can be useful to help support an improved quality of life during your final months.
However, once a claim has been made, any beneficiaries will no longer be able to claim after your death. The pros and cons of an early payout should be considered before doing so.
Outliving your policy
Some life insurance claims aren’t paid out because the policyholder has outlived the term of their cover. Term life insurance protects you for a fixed number of years. Many people take out this form of cover to provide a financial safety net alongside their mortgage. However, if you don’t die within this term, the insurer will not payout. Term insurance can be an affordable option because of these limitations. If you wish to ensure a guaranteed payout, then you may want to consider whole-of-life insurance. This type of policy will cover you for your entire life, though it is a much more expensive option.
Be careful to keep up with your premiums
Life insurance tends to be paid for on a monthly basis. If payments lapse for any reason, the provider may not be able to pay out on your life insurance claim. Setting up a regular direct debit will ensure that payments are made in a timely manner. If your circumstances change, then ensure that you speak to your provider to ensure continuity of cover.
What should you do if a claim is rejected?
It is actually very rare for a life insurance claim to get rejected. However, if this happens and you are sure that the application was made entirely honestly, then you can dispute this.
Firstly, any complaints should be made direct to the provider who should handle this as part of their dispute/complaints process. If the claim cannot be resolved, your case may be referred to the Financial Ombudsman Service. The FOS will then look into this further.
If a claim is all above board, then there should be no reason for it to be rejected. Life insurance claims obviously come at a difficult time for family members and providers will be sensitive to the circumstances. Most life insurance claims are paid out swiftly. This helps to ensure that those left behind do not have any unnecessary stress placed upon them when grieving for the loss of a loved one.