Mythbusting Life Insurance - Keeping You In The Know

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Myth 1: Life insurance companies don’t payout

This myth is definitely False.

According to recent research, there are approx 23.7 million protection insurance policies in place in the UK. During 2019, £5.7 billion was paid out in protection claims, up from 5.3 billion in 2018. Breaking the numbers down further it shows that on average £15.8 million was paid out every day in protection policies in 2019.

The report also shows that the percentage of claims paid in 2019 increased to 98.3% - the highest on record. The average term life protection pay out was £77,535 and the average critical illness cover pay out was £67,573.

As for the small percentage of claims not paid out these reasons are mostly due to non-disclosure. When applying for life insurance, you should read the questions thoroughly and ensure that you’ve answered truthfully. Lying about your health and lifestyle might make the premium cheaper but it could void your policy entirely if you need to make a claim.

Myth 2: You’re too young to take out life insurance

You can get life insurance from the age of 18. The younger you are the less expensive it will be. To give you a better idea of how much your cover might cost, below are 3 typical quotes based on a 25, 35 and 45 year old.

Age Monthly Premium
25 Year Old £5.00
35 Year Old £7.97
45 Year Old £17.26

The quotes are based on the following assumptions:

  • They are a healthy non-smoker and do not have a hazardous job or lifestyle
  • They want £193,500 of level term cover over a period of 25 years
  • The premiums shown are based on AIG's Life Start Term Assurance Plan and are subject to a full underwriting process and were correct as of September 2020.

Myth 3: If you’re healthy you don't need it

If you’re in good health you may think life insurance is an unnecessary cost, but there are reasons why it should be on your priority list:

Amongst other illnesses and diseases, a child born today has a 1 in 2 chance of developing cancer at some point in their lives according to a 2015 study conducted by Cancer Research UK. Life insurance with Critical Illness cover can help financially protect you and your family if that should happen.

Also, life insurance is cheaper when you’re younger, as the risk of age-related health problems drives premiums up as you get older.

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Myth 4: If you are a stay at home parent you don't need it

Life insurance doesn't just protect your income it’s to typically pay out a lump sum if you are to pass away, become terminally ill or be diagnosed with a listed critical illness within the policy term (again depending on the type of contract a customer has). This could benefit your partner and contribute towards future childcare costs should they need extra support.

Myth 5: I am already protected through my job

Although a death in service policy typically covers you for up to 4 times of your salary this may not be enough to cover your mortgage or any outstanding debts you may have. It may not be as comprehensive as what you need. Having a personal protection plan in place allows you to tailor insurance that is right for you and your family. In addition to this, if you lose your job or move to a company that doesn’t offer life insurance you’ll be without cover.

Myth 6: You can’t have more than one policy

This is false. Having more than one policy could be the best solution for your insurance needs if you need to protect your mortgage, leave some money to your family or contribute towards your funeral costs. You can also have multiple policies that cover you for critical illness or income protection so you are covered from all angles should you pass away, be diagnosed with a critical illness or be unable to work due to accident or sickness. By speaking to an expert adviser, they will take time to understand your needs and recommend a bespoke protection plan.

Myth 7: You pay more if you take life insurance through a broker over the phone

This is false, premiums charged by insurers reflect your individual circumstances and getting expert advice from a Life Insurance broker doesn't cost more. Source: ABI & Cancer Research UK

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