Realising the value of individual protection

Do you think life insurance, critical illness cover and income protection is worth it? Perhaps you don't think these kinds of policies pay out very often, or that the terms and conditions aren't that important. Well, you may be surprised, as figures from Aviva reveal that many people dramatically underestimate the value of individual protection, with such policies being far more beneficial than you may realise.

Near-perfect payouts

The research found that UK adults believe just 47% of individual protection claims are ever paid out, yet this perception is seriously far from reality, with Aviva confirming that it actually paid an impressive 96.7% of all individual protection claims in 2016.

This included 98.9% of life insurance claims, 92.3% of critical illness claims and 92.6% of income protection claims, with a total of £870m paid out over the year – £522m in life insurance, £311m in critical illness cover and £37m in income protection payments – equating to £2.4m every day, with more than 23,000 customers and families benefiting. Doesn't it make sense to consider this kind of protection yourself?

Among the small number of claims that were declined, many were due to misrepresentation of medical information during the application process, while others were declined because the customer or claim didn't meet the criteria, the condition wasn't covered, or there was no loss of income (in the case of income protection policies).

This highlights why it's so important to be truthful when making any form of insurance application, and why you need to check the policy details thoroughly. More education on these matters is clearly necessary if people want to reduce the chance of a claim being rejected: 33% of respondents said they haven't always been entirely honest when applying for insurance, while 53% said they don't bother to read the policy details and 54% only check when they need to claim.

As the insurer points out, the latter could increase the possibility of disappointment should a claim be made for something that isn't covered by their particular policy – such as a specific illness – and failing to be wholly honest could leave an entire policy null and void.

Get the protection you need

"It's a common misconception that insurers don't pay out on protection claims," said Paul Brencher, managing director of Individual Protection at Aviva. "Our research findings are alarming given our high, actual claims payout rates, [yet] claims rates could be even higher if all consumers were aware of the need to take extra care when making an application.

"Incorrect information, whether deliberate or accidental, and not checking the product details are some of the main reasons why a small proportion of protection claims cannot be paid. We hope that advisers can help us in preventing this, by stressing the importance of being as thorough and clear as possible when applying for insurance.

"As an industry, we must ensure the pervasive myth that insurers don't pay out isn't a barrier to families taking steps to protect themselves. Publishing claims statistics is a good way for insurers to demonstrate that they put their money where their mouth is and to reassure customers that any future claim will be taken seriously."

It's hoped that consumers reading such statistics will realise the importance of individual protection policies – together with the importance of being completely honest when applying for such cover – and the financial help they can offer families should the worst happen. It's vital to make sure you get the cover you need, so start the process by heading to our insurance quote tool and see if you can find the right policy at a price you can afford.