The myth surrounding life insurance payouts
On the whole, the general public hold a fairly dim view of insurance companies, believing they will do their utmost not to pay out, even when claims are legitimate, but is this merely a myth, a misnomer, or are these views grounded in truth?
All too often life insurance companies come in for criticism when they refuse to payout following the death of a policyholder, and if the claims are legitimate, then rightly so, but there are times when insurance companies have every reason to contest a claim, and it is in these cases that life insurance companies are often criticised unfairly.
When filling out insurance forms it is essential that prospective customers understand just how important it is to answer each and every question they are asked truthfully. We all know how the insurance industry works, with the more risk you represent, the higher the cost of the premium. This can make it tempting to answer questions relating to health, age, weight and smoking and drinking habits with half truths.
If you deliberately provide your life insurance company with false information then you leave yourself open to problems further down the line, and probably only for the sake of a few pounds a year. In the first instance, if the insurance company suspect you have provided false information, there is every chance they will decline the proposal before the policy is even due to commence.
If the insurer does accept the policy, only for the claims department to subsequently discover that relevant information has not been disclosed then they are within their rights to decline the claim and refuse to pay a penny. This is the worst case scenario, as the premiums which may have been paid for years will be wasted, and the intended beneficiaries of the policy will not have the financial security provided by the proceeds of the life policy.
To reassure all those of you who are unsure as to the veracity of life insurance companies, perhaps the fact that 99 per cent of all life insurance claims made in 2012 were paid will provide some assurance. Only 0.7 per cent of claims were declined, and these were due to non-disclosure on the part of the policy holder.