Life Insurance Payout’s Explained

How have life insurance payout’s been explained in the past? Does Life Insurance Always Pay Out. It sounds like a ridiculous question on the surface, doesn’t it? If you’ve kept up with your premiums and you die, then of course your policy will payout, won’t it? 

Unfortunately, there are circumstances where it will not….

The biggest reason that a Life Insurance policy won’t pay out is non-disclosure, which is when information regarding your health or lifestyle is either intentionally or unintentionally not disclosed to the insurance company when you apply for your insurance. 

But before you start panicking that you’re going to end up being hooked up to a polygraph machine and have a light shone in your eyes, you should know that in the UK it is no longer up to you to tell your insurance company everything about your health.

Legally the onus is on the insurance company to ask you the right questions to obtain key information about your health and lifestyle before they insure you. 

Therefore you no longer need to stress… Just answer the questions! If you end up not telling your insurance company something, but they never asked, well then, you’re 100% insured!

So, why is it that we still hear of Life Insurance companies not paying out? 

What Are The Reasons My Life Insurance Won’t Pay Out?

1. Unknown Non-Disclosure

This where you had no idea you already had a condition your insurance company asked you about, for example you already had ‘cancer’ when setting up your life insurance

If you ever had to claim on your policy because of that cancer, your claim would NOT be rejected, and your family would still receive 100% of the money.

2. Careless Non-Disclosure

This one sounds a bit harsh, but it’s when you are aware you have a condition, but you don’t appreciate the extent of it. 

You tell the insurance company you have ‘heart palpitations’ as that is what you honestly believed you had at the time. 

life insurance payout explained, More than Money

You later pass away and it is found that you had a much more serious heart condition which ultimately caused your death, your insurance company would view this as ‘careless’ and would pay out some but not all of the money, for example 50%.

3. Deliberate Non-Disclosure

This one’s pretty self-explanatory, but to give you an example; if you are a smoker and you tell the insurance company you’re a non-smoker, then later end up dying of lung cancer caused by smoking, this would result in no pay out. 

It’s because of reasons like this that it’s vital to get qualified advice before you take out your insurance policy. 

There are too many ‘non-advised’ brokers (salesmen) who care more about their commission instead of making sure your family is protected in the correct way. 

If you have taken out insurance either online yourself or without getting advice, you have no legal protection if your policy wasn’t set up correctly.

So, as you can see, disclosure is the big one, but what other reasons are there that a Life Insurance Policy might not pay out? 

Often there are exclusions you might not be aware of, that are either intentionally or unintentionally not explained properly to the customer – which means you might think you’re insured when you’re not.

These are the two we feel you should know:

1. Suicide 

This is one that everyone thinks is obvious, because why would suicide be covered right? … Well it is, just not in the first 12 months of your policy starting.

And there is a particularly good reason why. 

Suicide can often be linked back to poor mental health, if a person were ever to commit suicide, there is still a family that needs to be protected, which is the whole reason we have life insurance in place. 

Insurance companies simply know this is the right thing to do.

2. If You Are Living Abroad 

In most cases if you move permanently abroad you are no longer covered by your insurance company. 

However, some insurers are more lenient than others, although a lot of inexperienced brokers are unaware of this. 

As a rule of thumb if you leave the UK for no longer than 6 months out of the year and still have a UK bank account which you pay your premiums from, you’ll be fine. 

However, this does depend on the country you’re in and who insures you. 

Therefore, we stress you get the correct advice on this. You’ll be glad to know your family holidays are always covered!

Do I Need To Review My Life Insurance?

If you already have a Life INsurance policy then yes, you should review it regularly.

The insurance world is such a competitive place now and insurance companies are regularly updating their policies and improving their cover. 

Many now offer ‘freebies’ and extra benefits that your old policy won’t cover; services such as after care for your family if they were to claim on your policy, bereavement support, free physio if you are out of work, free terminal illness cover, and free life insurance cover for your children.

It is not the role of an insurance company to automatically update your policy for you. 

This is why we advise you to review your insurance and speak with a life insurance advisor at least once every 5 years. 

This way you will always have the latest benefits and won’t miss out on an opportunity to claim when you otherwise would not have been able to.

Common Myths About Life Insurance

There are probably things about Life Insurance that you definitely know, but you might be surprised to learn…

1. “Life insurance companies never pay out”


The top UK insurers pay out over 98% on all of their life insurance claims.

2. “My policy won’t pay out straight away”

Not true! 

You’re covered from day one of the plan.

3. “The Government will tax a percentage of my pay out”

Wrong again! Your pay-out is tax free so your family will receive every penny of what they are owed.

4. “If my health changes after I’ve taken out my policy, I have to inform my insurance company”

Nope! Once your policy is live, if there are any changes in your health, you do not need to tell them.

And so there you have it, there are actually very few cases where Life Insurance doesn’t pay out.

As long as you take out a policy with the advice and help of a broker, you can’t really go wrong…which is great peace of mind when it comes to protecting your family should the worst happen.

If you need advice about Life Insurance, including how to find the very best policy to suit your needs, give us a call – we’d love to help


I’m the Life & Critical Insurance guy! Having worked throughout London and the South East for years in this industry, seeing many bad habits, I wanted to create a company that put the man on the street first! I wanted to share all my knowledge in a way that was easy, simple and fun to read and I wanted to make sure whenever I or a member of my team speak to a customer, we cut out the ‘industry jargon’ and never pressure or push anyone to take out a policy they don’t want or understand, thus More Than Money was born!

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