It is a common misconception that insurers often do not pay out on claims made by their policy holders.
In this article I will explain how receiving advice throughout the process of applying for insurance will help you avoid the common mistakes that can invalidate your cover.
Obtaining the right advice
The underwriting process is a key part of the application and making sure you understand how it works is very important. This is why it is always best to seek advice first.
All the mortgage protection options we advise on are medically pre-underwritten upfront before you start paying for the policy.
This means that, as part of the application, you will complete a medical questionnaire – often over the telephone – giving you the opportunity to disclose any medical conditions that are pre-existing.
Giving the insurer all the information they need, upfront, will ensure you receive your benefit in your time of need.
And, as long as you are truthful throughout the underwriting stage, there should be no reason that you would not be eligible for your claim.
Common mistakes
The most common mistake made on an application is misrepresenting or not disclosing mental health history and family history.
Another disclosure that is often misunderstood is tobacco use. When a ‘social smoker’ refers to themselves as a ‘non-smoker’, this can invalidate the claim.
Without having an adviser to talk you through the risks and consequences of such mistakes, you may be none the wiser that your cover is invalid.
When do life insurers pay out?
Depending on the state, insurers can take up to 30 or 60 days to review a claim, assuming they have what they need for the claim.
If all documents are in order and a claim is straightforward, it can be processed and money can be paid in as little as 10 to 14 days. According to the Association of British Insurers (ABI) 99.6% of life insurance claims are paid.
Benefits of placing policy into trust
Dealing with money issues after the death of a loved one will be extremely distressing. It is not a period of time when someone will want to deal with complicated financial issues, and probate can be a complex and time-consuming process.
One way of avoiding this with life insurance is to consider putting your life policy in trust. It is something that will not cost any money and will mean that, when you die, the right money will end up in the right hands at the right time.
The benefits include:
- Reducing an Inheritance Tax (IHT) liability
By placing your protection policy in trust, the proceeds come out of your estate for IHT purposes, therefore reducing your dependant’s IHT liability.
- Control of the benefits
By placing your life cover in trust you can ensure the people you want to benefit from the policy receive the funds, regardless of whether you have a will in place or not.
- Speed of payment
A policy placed in trust can be paid out quickly without the need for lengthy legal processes.
How to get the advice you need
It’s important to get the right advice when considering protection for your mortgage and loved ones. This includes talking you through the providers that are available to you based on your health and circumstances.
My team and I are on hand to answer any questions or queries you may have. Feel free to contact me on Hatice.Karadal@alexanderhall.co.uk to discuss any of the points raised, or visit www.alexanderhall.co.uk.
Hatice Karadal is manager of the protection team at mortgage intermediary Alexander Hall
