What can I do to make sure my family get a life insurance payout?
If you’ve taken out a life insurance policy, you’ll have done so because you’re looking to offer financial protection for your family after your death. However, once you are gone you’ve no way of knowing whether a claim has been successful. So how can you make sure that your family will receive their life insurance payout?
Well, the most important thing to know is that in fact the majority of life insurance claims are indeed successful. According to the Association of British Insurers, 97.8% of all life insurance claims were paid out in 2017.
Of course though, there will be a small percentage of claims that won’t be successful. We’ve listed the most common reasons below:
You’ve lied on your policy
The number one reason for a life insurance payout being withheld is due to fraud or non-disclosure. Examples of could be failing to tell your insurer that you have a pre-existing condition. Or lying about the fact that you are a smoker. You don’t have to die of a directly related illness for this to invalidate your policy as smoking is thought to affect your health in a number of ways.
To avoid this from happening you need to be completely honest on your application.
The majority of life insurance providers will not payout if the policyholder takes their own life within the first 12 months of the policy. Insurers include this clause in order to safeguard against someone taking out a large policy, then committing suicide so that their family can claim. This has been known to help may then help people out of financial difficulties.
Whilst this clause is usually limited to 12 months, suicide claims after this period has passed may be turned down if the insurer feels that there has been non-disclosure of prior mental health issues.
Living longer than expected
If your policy is taken out under a fixed-term, you will not receive a life insurance payout if you outlive the policy.
Many people take out life insurance in conjunction with their mortgage for approx 25-30 years. This offers financial protection whilst there is still a large amount of debt to be paid off. Once the term has expired, your policy will too. Even if you die shortly afterwards your beneficiaries will no longer be able to claim. If you would like your family to benefit financially whenever you die, you may wish to consider a whole-of-life policy which offers a guaranteed life insurance payout.
Whether or not your life insurance pays out for a terminal illness will depend on your insurer. It’s always wise to check the small print before signing up for any policy. In some cases, you may be able to receive an early payout if you are diagnosed with a terminal illness and have a prognosis which is no greater than 12 months. If you are diagnosed with a terminal illness within the last 12 months of your policy, sadly the payout will only be made once you are gone.
You don’t adapt to life changes
A change to your circumstances won’t necessarily stop the insurer from paying out. However it may result in your family getting less than they need when the time comes. Many people take out life insurance that just covers their mortgage payments, but often forget to update this if and when they have children or move to a larger home.
It’s important to review your cover regularly to make sure that it still covers what you want it to.
As mentioned at the start, life insurance claims are rarely rejected. As long as you avoid the pitfalls above, your family should receive a successful life insurance payout after your death.
So Smart Protect are experts when it comes to insurance. Trained expert specialists have access to the UK’s leading lenders and using their knowledge and skills will place you with the most suitable lender and product for your needs.
The above post does not constitute advice – financial, legal or otherwise. The information within this article is the author’s own opinion and do not necessarily reflect the views of SO Media or So Smart Protect.