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Most life insurance policies pay out – but not all. In 2023, 96.7% of life insurance claims in the UK were approved, according to the Association of British Insurers.
While most claims go through without issue, there are still a few simple mistakes that can lead to delays, or in some cases, a rejected payout. Once that happens, there may be little your family can do to change the outcome.
Here are eight common mistakes to avoid to help ensure your policy pays out when it’s needed most.
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A life insurance policy only pays out to the people named on it. If that list is out of date, the money could go to someone you no longer intend – or be delayed by disputes.
This often happens after a major life change such as marriage, separation, having a child or writing a new will. Even if you've updated other documents, your insurer won't change your beneficiaries unless you notify them.
Most providers let you check and update this online. It only takes a few minutes, but it can make all the difference to the people you want to protect.
If you stop making payments, your life insurance will usually end – even if you've paid in for years. That could leave your family without the payout they were expecting.
It’s easy to miss a payment after switching banks, changing cards or forgetting to restart a paused direct debit.
Check that your policy is still active and your payments are up to date. If you're struggling, contact your insurer as soon as possible. Some policies offer a grace
It’s worth checking that your policy is still active and your payments are up to date. If you’re struggling, contact your insurer as soon as possible. Some policies offer a grace period or payment holiday, but you'll need to check the terms.
Life insurance won't pay out unless someone knows it exists, can find the details and makes a claim.
Store the key details somewhere safe but accessible. This could be a secure folder at home or a clearly labelled digital file. Include the policy number, the insurer's name and its contact details. .
You do not need to share the full paperwork, but make sure a partner, close relative or executor knows where to find it.
This isn't a mistake for everyone, but for some people, writing a life insurance policy in trust can make a big difference.
If your life insurance isn’t written in trust, the payout will usually form part of your estate. This means it may be delayed by the probate process and could be subject to inheritance tax.
Placing the policy in trust allows the money to go directly to your chosen beneficiaries. It usually avoids probate, speeds up payment, and keeps the payout separate from your estate for tax purposes.
It’s typically free to do, and many insurers offer help with setting it up. Just bear in mind that placing a policy in trust can limit your ability to make changes later on.
Find out more and get advice on life insurance using the service provided by LifeSearch. Discover more.
You might already have life insurance through your employer or from an older policy.
That is not always a problem. In some cases, having more than one policy is useful. But if they overlap, you could be paying for features that don’t offer any added value.
In some cases, the benefits do not stack. For example, you might expect to receive two payouts but only be eligible for one.
It's worth reviewing all the life cover you have to check whether your policies work together, or if you're doubling up unnecessarily.
Most life insurance policies only pay out if you die during the policy term. They don't usually cover serious illness or disability unless you’ve added specific protection.
It's important to check for any exclusions too. Some policies won't pay out for suicide in the early years or for deaths related to certain activities. These terms vary between providers.
A policy taken out five or ten years ago might not reflect what you need today.
Your mortgage may have changed, your family might have grown, or you may have taken on new financial responsibilities. In some cases, the type of cover you chose back then may no longer be the right fit.
For example, decreasing cover can work well to protect a mortgage, but might not provide enough support if you now want to leave a fixed sum or help your children financially in the future.
It is worth reviewing your cover every few years, or after a major life event, to make sure it still meets your need.
