The purpose of life insurance is to provide financial security if you or a loved one die. A policy can offer peace of mind with a lump sum payout. The financial help can cover costs such as funeral expenses, travel costs, or loss of income.
But there are certain reasons why life insurance would not pay out – that is even if you have been on time with your payments.
Let’s explore why this can happen so you can avoid an insurer not paying out.
What Are the Reasons Life Insurance Would Not Pay Out?
Although life insurance is designed to provide support for your loved ones after you are gone, there are a few circumstances where your insurance provider may not pay out as expected.
When getting a quote or applying for life insurance, it is important to disclose all relevant information. This includes risks like dangerous hobbies, health conditions, and other risky activities.
Misleading information on life insurance applications is considered a serious offence. It can lead to the cancellation of the policy or invalidate a claim in the future when you are most in need of support.
So be honest about conditions that may affect the policy, even if you think it is unimportant.
If You Die by Suicide
A life insurance policy may not pay out due to death by suicide. The suicide clause is a common exclusion in term life insurance policies and whole of life insurance policies.
The clause states that insurance may not pay out if the policyholder lost their life to suicide in the first 12 to 24 months of the policy starting.
If You Move or Travel Abroad
Life insurance can cover death overseas, such as travelling for work or while on holiday, if your permanent home is still in the UK. However, there may be geographical limits in place that you should bear in mind.
If your policy states you are covered when living overseas, your loved ones should get a payout should tragedy strike. There are certain circumstances, however, where your cover could be void. Be sure to speak to your life insurance company if you have concerns.
You Outlive Your Policy
If you outlive your term life insurance policy your insurance will not pay out.
Your insurance provider may contact you to renew a term life insurance policy before it expires. Renewing your coverage is normally straightforward and can give you financial peace of mind that your coverage will continue.
If terminal illness cover is included in your policy, and you are diagnosed after your policy started, it will not result in a rejected claim. However, some terminal illness cover might not payout if your diagnosis takes place within the last 12 months of your policy. If you are diagnosed with a terminal illness during this period, and your life expectancy exceeds your policy end date, your claim is unlikely to be successful.
Failure to Pay
Not paying your life insurance policy premiums on time, or at all, can lead to a policy lapse. A lapsed policy means your coverage is over and your loved ones will not receive a payout from the insurer when you die.
Many insurers will offer a grace period to policyholders who miss a premium payment. During this time, you can make a payment to reactivate the policy.
Automatic payments are an option to help make sure premiums are paid on time.
To avoid problems with your life insurance claim, make sure your beneficiaries have all the necessary documents. Missing paperwork can cause delays or lead to a rejected claim. Documents they will typically need to make a claim are the death certificate and the policy documentation.
Some insurers may need more information like medical records or proof of the beneficiary’s identity. Not having these can result in a denied claim.
If you are missing any documents, resources are available to assist you. The Association of British Insurers can offer support in cases of claim rejection.
Taking the time to gather all the necessary paperwork, and letting your loved ones know where they can find it, will make the claims process smoother.
What to Do If a Claim Is Rejected?
If you believe your life insurance claim was unfairly denied, you can take steps to challenge the decision. You can contact the insurance provider and follow their official dispute resolution process.
If the provider does not give the desired outcome, contact the Financial Ombudsman Service. They will thoroughly review your case and make a final decision on the matter.
At nowsure, our team of experts is on hand to provide their guidance and discuss your queries. If you are interested in a hassle-free quote, please do not hesitate to contact us today or call us at 0800 033 4187.