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Pay-out or bust: Can Life Insurers really be trusted?

July 18 2018 5 min read Life Insurance

can life insurers be trusted

You know how when you were a kid, you’d huddle around in a circle with your knobbly-kneed friends to play, and someone (usually Timmy) would insist you’d test the bonds of your brotherhood, and you’d all agree because you didn’t want to be the loser who said ‘no’?

Your good pal Timmy would tell you that he’d catch you if you fell backwards.

You’d agree because he was sound and then you’d fall like a bag of rocks and smack your head while Timmy laughed at what a trusting eejit you were.

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Well, it seems we have a trust hangover from our youth as we very recently ran a survey about Life Insurance and there’s one thing came to light that I want to tackle: a lot of people don’t trust the insurers to pay out.

And I get it: insurers can be tricky fellas, with watertight terms and conditions, complicated underwriting and confusing jargon. We all know someone who made a health claim that fell through or whose car insurance is sky high.

But here’s the thing: Life Insurance is a little different.

Life Insurance’s best-kept secret

A little background on the survey: we ran it over a couple of weeks in June to find out what the good people of Ireland think about Life Insurance. We asked if they had Life Insurance, who their policy was with, if they’d ever been declined – that sort of thing.

One of the questions was, “What percentage of claims do insurers pay?”

21 percent of the people who completed the survey said 80-100 percent.

Everyone else picked a lower answer.

Lots of Irish people think that insurers don’t pay out nearly as often as they do. Another 21 percent actually said that insurers pay out only 20-40 percent of the time.

That’s an awful lot of death claims going walkabouts.

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But do you know what the truth is?

97ish percent of all death claims are paid every year.

Those are damn good odds.

Riddle me this: if Life Insurers never actually paid out, why would people bother getting a policy?

You see Life Insurers actually need your money so that they can make money. The money they get from premiums is invested so that they can make money on your money.

If they never paid out, no one would ever pay in so they’d have no money to invest, pay claims or buy yachts for the bigwigs.

can life insurers be trusted

The other way that Life Insurers make money is if you outlive your policy so they get to keep your premium without having to pay a death claim.

However!

You can play them at their own game by getting a Whole of Life policy.

Once you pay your premiums, the insurer is on the hook for a pay-out no matter when you shuffle off this mortal coil.

Take that, bigwigs.

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So what happens with the 3 percent that don’t pay-out?

Life Insurance is a business like any other and it’s changed over the years. More insurers, (Ireland now has six companies providing Life Insurance) and the internet means that customers are better informed.

Life Insurance policies used to have exclusions, wherein they might not pay-out if you had a dangerous hobby, a high-risk job, or because of acts of war (bit of a random one, that).

Now, companies have to be more straightforward or risk losing customers. It’s very easy for a customer to spread the word about poor customer service or a bad experience. Something goes wrong and you can complain all over social media. 15 years ago you could… write a strongly worded letter?

More knowledge, independent brokers, and the competitive nature of the industry means that insurers have to play nice, or they’ll lose their customers.

Which is why only 3 percent of claims aren’t paid – and, usually, the 3 percent probably did something they weren’t supposed to do: maybe they didn’t disclose everything when filling out the form (read: lied about something) or they committed fraud (this is, admittedly, pretty rare).

I swear to tell the truth, the whole truth…

Now don’t read that paragraph and come away thinking, “okay, so if I die of a heart attack, I’ll get away with telling porkies about my smoking habit.”

That’s not how it works either as the cause of your hypothetical death doesn’t have to have anything to do with the thing you haven’t disclosed.

You might not see the link between lying about smoking and dying because you’ve been hit by a flying toilet seat, but the insurer might. (How’s that for an obscure mid-noughties TV reference?)

Smoking (or a high BMI or a dangerous job or whatever) will make your policy more expensive. Smoking will actually make it a lot more expensive, so if ever there was a good reason to quit that’s it – carcinogenic bedamned.

If the insurer finds out that you’ve been economical with the truth (and they probably will), they’ll refuse to pay out on the grounds that your premium should have been higher from the outset of your policy. Therefore you have underpaid so they have grounds to decline your claim.

There’s a very simple solution to this problem: don’t lie on the form.

If you do have a chronic illness or an issue that you think might cause problems or lead to an insurer declining you outright, don’t worry: I work with all six insurers so can likely get you cover.

Again, the secret is in knowing how to play the game: and we’re the World Cup winners of the life insurance game.  We’ll match you up with the insurer who is most sympathetic to your health issues/the most likely to give you a good deal.

Ultimately, insurance is a business, but the more you know, the more likely you are to get the best deal.

Over to you

Getting Life Insurance is one of the best things you can do for your family. In our survey, 59 percent of respondents said that safeguarding their family’s future was their big motivator for getting cover.

If you’ve got kids, it’s your responsibility to take care of them when you’re here…and if you’re not.

Want some guidance on putting the correct cover in place? Complete this questionnaire and we’ll be right back to you. If you have any questions, I’m happy to talk so give me a bell on 05793 20836.

Nick McGowan
lion.ie | making life insurance easier

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