There’s long been a myth attached to insurance companies that says they rarely pay out when people really need them. And it’s caused people to be sceptical about taking out insurance policies to say the least.
Couple this myth with the fact that many people assume that the state will provide for them if the family breadwinner can no longer work because of an illness and you can see why there is a growing protection gap appearing across the UK.
But that myth can now be well and truly debunked by statistics released by the Association of British Insurers (ABI).
According to the ABI’s latest figures, insurers paid out £3.44 billion on 128,500 life and protection policies in 2014. For comparison, £3.08 billion was paid out on 98,900 policies in 2013.
£9.4 Million Paid Daily
The 2014 figures show that insurers are paying out an average of £9.4 million every day on 350 policies, which means some 350 families are receiving help to cope with the stress caused by a life-changing event every single day.
The ABI’s figures also show that 98.7% of the 25,018 term life insurance claims made last year were paid out, with £60,944 the average pay out.
Critical illness insurance pay outs averaged £67,039 last year, with 92% of the 15,652 claims made paid – up from 80% in 2005.
A total of £540 million was paid out in 2014 on whole of life policies, with an average payment of £7,403, which compares to £450 million in 2013.
Terminal illness policies saw 2,911 claims made, of which 93.4% were paid, with an average payment of £98,506.
The number of claims made against permanent disability insurance policies totalled 707, with 64.1% paid – up from 50% in 2009 – and £73,241 paid on average.
Protection Making a Real Difference
Finally, the average individual income protection policy pay out in 2014 lasted for 204 weeks (almost four years) and was worth £39,200, with 92.9% of claims made paid.
James Dalton, Director of General Insurance Policy at the ABI, said protection can make a real difference at times of extreme stress.
“Insurance can play a role in improving families’ financial security, to help them after the loss of a loved one or support them if they are unable to work,” he said.
However, Dalton warned that many households have no real financial safety net, adding: “Each year, one million workers suddenly find themselves unable to work for more than four weeks due to illness or injury.”
The figures from the ABI prove that the vast majority of insurance claims made last year were paid accordingly and that the amounts and frequencies of pay outs are increasing year-on-year.
When we are advising our clients on their protection needs, a common question is will it pay out when I need it? The figures from the ABI should provide further peace of mind and show just how many individuals and their families are currently being helped by insurers to cope with the financial strains and worries that can be caused by a life-changing event.
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