Are all Life Insurance Claims Paid out?

Are you a cynic when it comes to life Insurance? Do you believe that life insurance companies will look for any excuse not to pay out a claim? Then read on….

For every 100 life insurance claims, what % do you think the life insurance companies pay out on? The answer is 97%, but what about the 3% of life insurance claims that aren’t paid? There are generally 2 main reasons which account for the remaining 3 % 

  1. Non-Disclosure

This is when you don’t tell the whole truth on your application form. Remember the questionnaire you signed which asked if you have disclosed all material facts on the application. Such material facts may relate to medical history, family medical history, smoker status etc. The insurer takes you at your word and will not automatically double-check with your GP about any information your give. If you’re in doubt as to whether something is relevant, tell the insurer and let them make the call. Non-disclosure accounts for the vast majority of non-payment of claims.

But what if the death claim is unrelated to the non-disclosure? For example, What if someone lies about being a smoker but die in a car crash? Will the life insurance claim be rejected? Most likely yes, its all about disclosure of material facts, in this example, had the underwriters known you were a smoker then they would have increased your premium. The fact you were paying a lower premium gives the insurer grounds for voiding your policy from the start, it’s as if your policy never existed.

  1. Fraud

This is very rare but can happen, some examples include: Falsifying medical reports to support a life insurance claim, Taking out multiple high value policies with various insurers without disclosing this to each insurer.

In Summary, Life insurance companies do not set out to intentionally reject claims, in fact in most cases they’ll do all they can to pay out, after all its bad for business to be seen to consistently reject claims. However, if you deliberately and fraudulently mislead the insurer, they will do all they can to fight the claim. As a general rule, If you’re in doubt whether a medical issue in relevant, tell the insurer and let them make the final decision.

Barry Kerr BBS QFA CFP® is the owner of Wealthwise Financial Planning in Bridge St, Carrick on Shannon, www.wealthwise.ie. Barry Kerr T/A Wealthwise Financial Planning is Regulated by the central Bank of Ireland. All details and views contained within this article are for informational purposes only and does not constitute advice. Wealthwise Financial Planning makes no representations as to the accuracy, completeness or suitability of any information and will not be liable for any errors, omissions or any losses arising from its use.