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Life insurance mythbuster

Myths about life insurance, busted

We’ve picked some of the most common life insurance myths and sorted fact from fiction

By Mehdi Punjwani

Published: 04 June 2020

Looking for life insurance?

Myth #1: Life insurance policies don’t pay out

This simply isn’t true – in fact, in 2019 an insurer on our panel paid out on:

  • 96% of their life protection claims – to the value of £71.5 million
  • 94% of their critical illness claims – to the value of £41.9 million
  • 93% of their terminal illness claims – to the value of £33.4 million*

In addition, data from the Association of British Insurers (ABI) shows more than £5.7 billion was paid out in protection insurance claims in 2019 – up by more than £470m the previous year. This meant pay-outs equal to £15.8m a day.

The ABI also found 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.**

*According to data provided by Aegon, accurate as of March 2020

**According to data provided in an ABI news release in May 2020, accurate as of May 2020


Myth #2: I need to undergo medical checks to get life insurance

Most insurers won’t ask you to undergo a medical exam when you apply for life insurance – and they’ll generally only ask you to do this if you have a history of severe health issues.

My insurer will ask me to release my medical records

You’ll only need to release your medical records if there’s a history of medical issues with you or your family.

I’ll have to go through annual health check-ups

Even if you did have to undergo an initial medical check due to severe health issues, once you have your policy you won’t need to sit any annual check-ups.

Myth #3: I don’t need life insurance because I don’t have children

While an important benefit of life insurance is to provide security for your children should you pass away, it’s not the only thing your policy will offer. You can also use life insurance to cover:

Myth #4: My employer’s life insurance covers me

The life insurance or death in service benefit provided by your employer may not be as comprehensive as you need – so you might be better off purchasing your own policy to ensure you have the right cover in place. This way you can tailor it to your exact requirements. In addition, if you move to a company that doesn’t offer life insurance or a death in service benefit, or you lose your job, you’ll be without cover.

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 #5: I’m healthy so I don’t need life insurance

If you’re young and healthy you may think life insurance is unnecessary, but there are reasons why it should be high on your priority list:

  1. Unfortunately, accidents can happen, and you never know when you’ll be involved in one
  2. Life insurance is cheaper when you’re younger, as the risk of age-related health problems drives premiums up as you get older

Myth #6: I don’t need life insurance as I’m a stay-at-home parent

If your spouse is the main breadwinner of the family, it would make sense for them to have life insurance. But if childcare is your responsibility, your passing away could result in childcare costs or income replacement should your partner stop working or cut down their hours to take care of the children – which life insurance can help cover.

Myth #7: I have to undergo credit checks for life insurance

Insurers won’t run credit checks when you apply for life insurance. If you can no longer afford to pay your premiums, you can just stop paying them and your policy will end.

Myth #8: I get a cash lump sum if I survive my life insurance term

If you have term insurance – rather than whole-of-life cover – and you survive the length of your policy, it comes to an end and you stop paying your premiums – there won’t be any pay-out.

Myth #9: My life insurance pay-out will be tax-free

Your life insurance pay-out will only be tax-free if you write it in trust – your insurer should take care of this for you, but make sure you remind them.

If you don’t write your policy in trust, the pay-out is added to your estate once you pass away – meaning it could be subject to inheritance tax.

Writing your policy in trust can also speed up the payment process.

Myth #10: My partner and I should take out joint life insurance

Joint life insurance policies are generally cheaper, however a first-death joint policy will only pay out once, when the first of the policy holders dies. The second policy holder will no longer be covered, and as they would be older they would have to pay more for life insurance if they wanted to take out another policy.

You also have to consider what would happen if you and your partner were to split up, as this can also cause complications. It’s up to you to weigh the pros and cons – you can read more in our guide to single vs joint life insurance.

Myth #11: Critical illness cover always offers two pay-outs

Critical illness cover pays out if you’re diagnosed with a condition on a list defined by your insurer – and it comes alongside your life insurance policy. However the type of pay-out you’ll get depends on whether you take it out in addition to or combined with your life cover.

  • Additional critical illness cover pays out twice – once if you get a critical illness, and again if you pass away during the term of your policy
  • Combined critical illness cover only pays out once, either if you become critically ill or pass away during the policy term

At MoneySuperMarket we believe additional critical illness cover provides a more flexible and comprehensive solution than a combined policy. When you run a quote with us, you’ll have the option of taking out additional cover, and the extra premiums will be calculated with the information you gave when completing the quote.

Myth #12: If I’m in bad health I won’t be able to find cover

Many life insurers will still cover you if you have existing medical conditions – and there are some who offer specialised policies for people who need them. However you can expect to pay higher premiums as a result.

Compare life insurance policies

Finding affordable cover is quick and easy when you compare life insurance policies with MoneySuperMarket. All you need to do is tell us a little about yourself, your circumstances and the amount of cover you need, and we’ll put a list of quotes together tailored to your requirements.

You’ll be able to compare policies by the overall cost and the cover you’ll get – once you’ve found the deal you want, just click through to the provider to finalise your purchase. As with all types of insurance, the cheapest available deal isn’t always the best – make sure you have the right protection in place by aiming for a balance between cost and coverage.


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