Some of life’s most exciting moments are the ones that you don’t expect. From big announcements such as a pregnancy to even a surprise birthday party, the joy of these memorable times often stems from not knowing that they’re coming.

On the other hand, there are also unexpected events that are far more concerning. In particular, becoming injured or too ill to work, or even worse passing away could leave you or your family in the lurch.

This is where having financial protection can be so reassuring. While you hope that you’ll never need to use it, knowing that you have cover for these events can be immensely reassuring.

However, despite the value that financial protection can provide, there’s a common and pervasive belief that it doesn’t pay out when you need it.

In reality, this is a misconception, and it’s proven by the latest data collated by the Association of British Insurers (ABI), a professional body representing more than 300 insurance and long-term savings companies in the UK.

Find out what these figures show about financial protection claims, especially in regards to some of the types of cover you may have.

Group and individual protection policies paid out a record £7.34 billion in 2023

Each year, the ABI collects data from its insurance provider members on the number of claims made, how many were accepted, and how much was paid out on an annual basis.

In 2023, protection payouts reached a new record of £7.34 billion paid out to individuals and families, of which £4.85 billion was paid to individuals. That works out to around £20.1 million paid out a day.

Of all individual claims made, 98.3% were accepted, dipping slightly to 97.4% when including groups and individuals. Either way, both figures are a clear rebuttal of the belief that insurers will attempt to avoid paying out.

In fact, the most common reasons for a claim being denied were policyholder mistakes, with the person covered:

 

  • Failing to disclose medical conditions when taking out the policy
  • Not meeting the policy definitions.

 

The ABI also segments its data by the type of cover held. In particular, the three that might be most relevant to you are:

 

  • Life insurance
  • Critical illness cover
  • Income protection.

 

Find out more about the payout statistics for each of these types of cover below.

Life insurance

Life insurance provides a payout to your beneficiaries if you pass away during the term of the policy.

The ABI separates life insurance into two further categories in its data:

 

  1. Term life, which covers a policyholder for a specified number of years. This might be until retirement, or for the term of a specific financial liability, such as a mortgage. In 2023, term life insurance paid out a total of £3.922 billion across 48,782 new group and individual claims, with an average payout of £80,403. Of new claims, 96.7% were paid.
  2. Whole-of-life, covering the policyholder until they die, whenever this is. Group and individual whole-of-life payouts totalled £1.216 billion in 2023, with 211,088 new claims paying out an average of £5,760. A remarkable 99.98% of new claims were paid out for this kind of cover.

 

As you can see, claims rates are notably high for life cover. So, provided that you disclose all necessary information to your provider and maintain your premiums, you can be confident that your loved ones will receive the payout you want to leave for them in most cases.

Critical illness cover

Critical illness cover provides you with a lump sum if you are diagnosed with one of the serious conditions listed on your policy. This includes illnesses such as heart attacks, strokes, and some forms of cancer.

You can then use this lump sum however you wish, whether that’s to cover medical costs or lost income if you’re unable to work.

The ABI figures show that individual critical illness cover payouts increased to a new record in 2023, reaching £1.2 billion – a £136 million (13%) increase on 2022.

Across both group and individual policies, claims paid totalled £1.359 billion. Of this figure, 90.5% of new claims paid out, with 19,876 new claims paying out an average of £68,354.

This sum would be hugely valuable for you and your family if you were to be diagnosed with one of these illnesses. Additionally, as 9 in 10 new claims paid out, it’s more likely than not that your provider will do so.

Remember: it’s crucial to correctly complete your application for your cover, disclose all pre-existing medical conditions, and maintain your premium payments. If you fail to do any of the above, you could be denied a payout.

Income protection

Income protection can offer a regular income stream if you lose yours due to issues such as illness, injury, and depending on the cover, redundancy.

This is usually calculated as a percentage of your existing income, and will typically pay out until you return to work or retire – although again, this can vary between providers.

In 2023, individual income protection claims reached £177 million, with an average claim payout of £9,425. Most commonly, these related to neck and back pain, although mental illness claims contributed the highest value, coming in at £37 million.

When including group policies, these figures increase to £810 million in claims paid, offering an average payout of £22,270. In total, 81.3% of new claims were paid.

A total of 17,361 new claims were paid in 2023. This is aside from 1,660 individual claims that have been in payment for more than 10 years, of which 376 have been in payment for more than 20 years.

As you can see, income protection could be a valuable lifeline in difficult circumstances when you’re set to lose your income. Of course, just as you must with the other types of cover, it’s crucial to correctly input your personal information and that you choose a level of cover suitable for your needs.

Get in touch

Want to find out more about how financial protection could provide a safety net for you and your family? We can help at Cordiner Wealth.

Email hello@cordinerwealth.co.uk or call 0113 262 1242 to speak to an experienced professional today.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

Note that protection plans typically have no cash in value at any time and cover will cease at the end of the term. If premiums stop, then cover will lapse.

Cover is subject to terms and conditions and may have exclusions. Definitions of illnesses vary from product provider and will be explained within the policy documentation.