The Myths about your Life Insurance Policy

Myths! Fables! The stuff of legends... (quite literally) are exciting to read about.

Who hasn’t heard of the famous 300 Spartan Warriors? Who hasn’t read about Hercules?  And lest we forget Achilles!

A bit easier with this Demigod, seeing as he’s been living among us for the past 57 years *cough*cough* Brad Pitt. That’s just Greek mythology!  In Scotland, the story of Robert the Bruce and The Spider is still taught in primary schools.  Selkies, Kelpies and the Loch Ness Monster are stories that still fascinate youths and adults to this day because myths and stories are common in every culture and they continue to inspire.

But, let’s face it, although mythological creatures can sometimes stem from truths and take place during factual historical events, they’re usually riddled with plot holes, over-the-top interpretations, or are stories that have simply fallen victim to a very long game of ‘broken telephone.’ I mean, if you’re reading this you’re interested in knowing what’s fictitious about your life insurance policy/ies.

So, what are these myths that surround life insurance, and how do people perceive it?

‍Cameron, Director of McLean Financial Services, says it’s because “It’s very easy for people to dismiss the unknown, especially when life insurance can be such a dry topic.” Let’s face it, it’s easier to have future you or your descendants deal with those issues. “Our team of Advisors has found that, generally, our clients just don’t know enough about life insurance.”A good Protection Advisor will take the time to explain the insurance fine print and jargon but, an excellent Protection Advisor will review your existing cover (including any employee benefits you might have) and then advise you on where and how the gaps you’re faced with will affect you or your descendants.  We’ll never know what the future holds! It’s a cliche phrase, tossed around for a millennium. So why then, have 5.8 million adults in the UK suddenly considered life insurance? One word… Covid. A recent article in the Financial Times cited the pandemic as the reason for the surge in additional life insurance applicants.

Let’s put that into perspective shall we:  The current UK population is over 68,3 million so 5.8 million 8.5% of the population. That’s like having everyone in Manchester, Glasgow, Edinburgh, Newcastle, Aberdeen, Inverness and Dundee (plus another 48,000) all decide in one year that they need to consider life insurance cover! Not such a dry topic anymore is it…Here’s a little table to give you some perspective.

What’s more, is that it’s estimated that over 60% of the UK adult population do NOT have any form of life insurance! That means more than half of the UK are relying on their future-self solving their/ their family’s problems. That’s staggering!Mabel has previously shared her and her family’s protection portfolio. In her 20s, Mabel considered culling her monthly life insurance direct debit, she’s glad she didn’t.  “When I got my first mortgage, my mortgage broker explained life insurance to me and I just went along with it. And to be honest, I didn’t really get it but, I’m so glad my mortgage advisor was looking out for me. You see, I have developed medical conditions which would hike up my monthly premiums considerably now.  But, taking out insurance when I was young (a lot younger) meant my premium hasn’t changed in 15 years, making it still affordable.”

Financial resilience is something we should all aspire to. But, the harsh reality is that most households are 24 days away from the breadline i.e having no income to pay for essentials.  Savings are prioritised by individuals over protection policies, which is to most... understandable. But, here’s another statistic...1 in 5 households have no available income to save once essentials and luxuries are accounted for. Let’s play a game of true or false.[Don’t worry this is not Squid Game, there are no repercussions for ‘stepping’ wrong, here]

1. Aegon pays out, on average, 97% of life insurance claims.  [T/F]
2. Vitality paid out £50 million in life insurance claims for 2020.  [T/F]
3. Over the last five years, Legal and General, have paid out over £3 billion in claims.    [T/F]
4. Aviva paid out over £3million for children’s benefit claims in 2020.  [T/F]
5. All insurers find loopholes to not payout.  [T/F]

Before you get the answers know this:  To ensure your claim is paid out, we advocate honesty.  Be honest with your alcohol consumption and nicotine use.  Disclose all your hobbies, even if it’s extreme mountain biking.  A Protection Advisor will tell you that misrepresentation is the main cause for claims not being paid out.  Make sure you answer all questions pertaining to your health and lifestyle as accurately and honestly as possible.  We know some of the questions asked are very, very personal and can feel invasive but, using an Advisor you know and trust, does make the process easier.  So now for the answers…

1. ‍True; Aegon paid out more than £139million in Life Insurance claims in 2020.‍
2. False; the amount paid in 2020 was higher.  It was £61.9m.‍
3. True; Legal and General paid out £32m more in 2020 than in 2019. ‍
4. False; it was over £5.5m, each year it has risen.  In 2016 they paid out £3m. ‍
5. False; Legal and General paid out on 96% of life insurance claims in 2020.  Aegon paid out on 96%, Vitality paid on 99.6% and Aviva paid out on 99.3%.  The statistics don’t lie.

So, how did you do?  Who’s the swot (and is probably a Protection Advisor) who scored full marks?  If any of these answers surprised you then it’s time you spoke with a Protection Advisor that lives up to the legends. Every good story, no matter how trying, no matter how dark, needs a skilled hero who is up to the task.‍

Sources:

• ‍‍https://www.legalandgeneral.com/landg-assets/adviser/files/protection/sales-aid/claims-magazine.pdf
• ‍https://www.aegon.co.uk/personal/insurance/claims.html#:~:text=In%202020%20we%20paid%2096,honest%20about%20their%20alcohol%20usage.
• ‍https://www.vitality.co.uk/media/vitality-publishes-2020-protection-claims-statistics/https://www.legalandgeneral.com/landg-assets/adviser/files/protection/sales-aid/deadline-to-breadline-report-2020.pdf
• ‍https://www.aviva.co.uk/adviser/documents/view/pt151147-2020_individual_protection_claims_report.pdf
• ‍https://www.ftadviser.com/protection/2021/06/25/pandemic-prompts-5-8m-adults-to-consider-life-insurance/