Life insurance payouts for 2021 and situations where insurers won't pay out
The Association of British Insurers (ABI) has collated life insurance compensation data from the last year to specifically show the impact of Covid-19 on life insurance claims.
This is the first time the ABI has provided specific data for a single event, namely the Coronavirus pandemic.
What does the ABI data reveal? - Does life insurance really pay out?
The ABI has reported that life insurance companies paid out £202 million in total (equating to £553,000 per day) for the year 2020, and these payouts are solely related to Covid-19 deaths.
The total amount paid (£202 million) comprised a £250,000 initial payout that was paid just one day after insurers received notice of a death and a sizeable £1 million compensation payment to dependants. The total amount paid on individual policies was £128 million.
A total of 11,198 life insurance claims were made on single and group policies - 96% of single policy claims have already been processed, as well as 99% of group claims.
All of this recent life insurance compensation data is reassuring, but what are the situations where insurers may refuse a life insurance payout after a death in the UK in 2021?
6 reasons life insurance won't pay out
The most common reasons for why life insurance policies won’t pay out include the following:
- Withholding information concerning medical conditions and personal details
- Committing suicide within the first 1 or 2 years of the policy's start date
- Living longer than the full term of your life insurance policy
- Terminal illness diagnosis (but typically results in an earlier, smaller payout)
- Moving abroad (check how this affects your insurance before moving)
- Non-disclosure of certain lifestyle choices (i.e. smoking, extreme sports, etc)
For more comprehensive details, check out our related guide: Common reasons why life insurance won’t pay out.
Do life insurance policies pay out for suicide?
Yes, most insurance companies do pay out for death by suicide. However, most (if not all) policies contain a ‘suicide clause’ that specifically excludes suicide claims from being honoured should suicide occur within 12 to 24 months of a policy inception date.
There could be other circumstances where a suicide claim isn’t accepted - if the insurer discovers you suffered from mental health issues prior to taking out life insurance but failed to disclose this, for example.
How long does life insurance take to pay out in the UK?
Straightforward claims where paperwork is received promptly by an insurer can take as a little as a few days for a life insurance policy to be paid out.
This early payment will usually be classed as an initial payment on a policy to help with funeral costs. A second payment for the balance compensation is usually paid within one month of an insurer receiving all the necessary paperwork. However, other policies and claims may take up to 2 months or more; it really depends on the individual insurer and the circumstances of an individual claim.
The main reasons payouts can be significantly or indefinitely delayed are where claims are disputed and an investigation is required or where there are lengthy delays in the necessary paperwork being sent to the insurer (i.e. Death Certificate).
Will life insurance pay out for coronavirus?
Yes, as mentioned previously, most insurers honour Covid-19 related claims.
However, you should specifically check what Covid-related illness or death is covered by your existing life insurance policy or before taking out a new policy, as some policies contain exclusion clauses specifically relating to pandemics.
Best way to get life insurance
The best way to get life insurance is by comparing quotes online yourself or alternatively, seeking the help of an independent life insurance broker to find the best deal and insurer for you and your particular set of circumstances.
For more information on life insurance, take a look at our life insurance FAQs.
Don't have a life insurance policy? This means that you and your loved ones aren't financially protected should the worst happen unexpectedly. Get an affordable quote with Bobatoo today:
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