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Do you think financial protection claims aren’t upheld? 98% were paid in 2021

May 05, 2024

If you think that insurers don’t pay out when people make claims, you’re far from alone. 

According to Scottish Widows, just 7% of people think that life cover claims pay out between 91% and 100% of the time. 

For critical illness claims, this figure falls dramatically to just 2%.

Together, these figures show the lack of confidence many people have in insurers to pay out when claims are made.

In reality, however, this perception is far from accurate. So, find out the true figures behind financial protection claims, and why keeping your cover in place is important, especially as the cost of living soars in the UK.

98% of claims made in 2021 were upheld

Data from the Association of British Insurers (ABI) shows that 98% of claims made in 2021 were upheld, with insurers paying out a record £6.8 billion in individual and group life insurance, income protection, and critical illness claims.

This translates to £18.6 million paid out every single day, £1.6 million more than in 2020 when the previous record was set.

The table below shows a breakdown of these figures for six of the largest insurers in the UK:

 As you can see, the number of paid claims is typically in the 90s, and doesn’t drop below 80% in any of these examples. That means the perception that insurers don’t pay out isn’t accurate at all. 

What protection do these types of cover offer?

Now you know that insurers will pay out in the majority of claims, it’s also useful to understand what you receive from these three types of cover.

Find out more about life insurance, critical illness cover, and income protection below.

Life insurance 

Life insurance pays out a lump sum to your chosen beneficiaries if you die while the cover is in place. 

There are different types of life insurance, two of the most common being:

  • Term life insurance, in which your cover lasts for a set number of years and then expires if not renewed
  • Whole life insurance, a type of cover that does not expire. 

Your chosen beneficiaries of your lump sum are then free to use the money as they wish, including paying household bills and mortgage repayments. 

According to the ABI, the average value of a life insurance payout was £80,485 in 2021.

Critical illness cover

Critical illness cover provides you with a lump sum payout in the event that you’re diagnosed with a critical illness or have major surgery that’s covered on the policy.

Illnesses and surgeries covered by critical illness cover can include:

  • Heart attack
  • Stroke
  • Many types of cancer
  • Kidney and liver failure
  • Open-heart surgery.

In this event, you’ll receive a lump sum payout and your cover will end. This lump sum can be instrumental in helping you to provide for your family at a difficult time, especially if your condition is particularly serious or even terminal. 

The ABI recorded the average value of claims paid to be £67,951 in 2021.

Income protection

Income protection offers you a regular income if you’re unable to work due to sickness or disability. The cover will continue until the term of the policy ends, you’re able to return to work or you retire.

Typically, you’ll receive around two-thirds of your current income from your cover. This income is tax-free, meaning it should be almost akin to your take-home pay.

This can be a significant lifeline if you’re suddenly unable to work, ensuring that you can continue to provide for your family. 

The average value of claims paid was £23,380 in 2021, according to the ABI.

Financial protection is even more important in the current climate

With the cost of living on the rise and the need to tighten your belt seemingly a high priority, cancelling financial protection you have may seem like a sensible way to reduce your expenses. 

However, this may actually be a mistake, especially during periods of uncertainty like this.

You never know what’s going to happen next, and so having protection in place offers you and your family financial security.

Imagine that you were to be diagnosed with a critical illness or become disabled in such a way that you were unable to work. This could put your family in a difficult position where you suddenly couldn’t afford to pay your bills or your mortgage repayments.

By having protection in place, you’ll be financially covered if one these events occurs, providing a valuable lifeline that ensures your family are able to continue living your lifestyle with as little disruption as possible.

At the very least, you’ll have the reassurance that you’re covered amid the uncertainty that we face right now. 

Get in touch

Do you want to find out more about the financial protection options available? Get in touch with us today.

Please note

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

Note that life insurance 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.

What our clients say

The people we help are at the heart of what we do. Here are some of their testimonials.

I would highly recommend Darius and John. I’ve used a financial adviser previously and could never get in contact with them when I needed their help. Stratton Wealth Management have been excellent from the start. They are always available to talk, and they also don’t talk in financial jargon!

Dave Rigby -

A client since 2015

Having recently transferred my financial management to Stratton Wealth Management, I have been extremely impressed with the highly professional service I have received. I feel I have been fully involved in all decision making, and the company's highly skilled advisers have shown commitment and patience in any dealings I have had with them. I have also always found them to be easily accessible for any discussion I may require.

Denise Thornton -

A client since 2019

As a business owner and father of four children, finances are usually the last thing we think about. Stratton oversees and manages our finances, both in terms of advice for my business and our personal investments. It is comforting to know that our retirement, investment and life insurance planning has been taken care of. Darius and John are always so efficient in dealing with our affairs. As someone with no real understanding of the ins and outs, it has been fantastic to have experts giving us great advice and making sure our best interests are always the top priority.

Lee and Claire Parkinson -

Clients since 2016

Darius deals with my family’s finances and is a very trusted adviser. We meet a number of times a year, but I know I can call him any time if I have any questions. He is proactive, helpful and friendly!

Jonathan Dennis -

A client since 2019

Darius has been our adviser for a number of years, and when he told us he was starting his own firm, we had no hesitation in moving with him. We had a number of areas that we needed help with, including the complexities around an employee share scheme, investments for us and our new child, in addition to our retirement planning. Darius has continually provided us with a first-rate level of service and we would highly recommend Stratton.

Eamon and Holly O’Hara -

Clients since 2017

I knew I needed to begin saving and planning for the future but didn’t know where to start. Stratton helped me to understand my finances and put together a savings plan that is affordable and works for me. I now have and an ISA and a pension, and whilst retirement is many years away, I have the peace of mind that I am saving for my future. I look forward to working with them for many years to come.

Martin Corrigan -

A client since 2016

I have been impressed with the advice and service provided by Stratton Wealth Management and have always found Darius to be approachable, dependable and highly professional in his approach. It is reassuring to be able to have such a high level of confidence and trust when it comes to financial advice.

Russell Jones -

A client since 2018

Many thanks indeed for your in depth report for my client Mrs H – it is most thorough and above all readable. This might sound particularly strange; however you may well gather that in my profession we see many such reports, and I often feel that if the adviser fills it with charts and graphs it evidences a level of research. In truth most of what is produced is readily obtainable from the internet.

I would like to thank you (and your organisation) for your prompt and professional attention to my requirements on behalf of my client. As a practice we shall definitely be putting Stratton Wealth Management on our “preferred supplier list".

Colin Dunstall, Donaldson Dunstall Solicitors -

A client since 2015