If you take out a life insurance policy and you pass away during its term, your loved ones will need to make a claim to receive their lump sum. Life insurance companies do their best to make the claims process as stress-free as they can. After all, it's a very difficult time for your loved ones. However, they need to follow the correct procedures in order to get their payout quickly. In this article, we'll look at how to quickly and easily claim on a life insurance policy, so your beneficiaries can reap the rewards of your good financial planning.
In 2023, 96.7% of all life insurance claims process were paid out - Source: Association of British Insurers
The life insurance payout is the money your beneficiaries receive if you pass away during the term of your life insurance.
The size of your payout depends on several factors. When you first take out your life insurance policy, you can decide how much cover you need.
However, the exact amount may change during the term of your policy. For example, if you select a decreasing term life insurance policy (to cover your mortgage payments), your payout will be larger at the start of the term compared to the end.
Typically, people use life insurance payouts to meet financial obligations, like a mortgage or other debt. On the other hand, your loved ones may prefer to put it into a savings or investment plan, or use it to pay for the funeral you always wanted.
Life insurance policies also pay out if the policyholder is diagnosed with a terminal illness during the policy term. A terminal illness is usually defined as an incurable condition with a life expectancy of 12 months or less.
If you receive a terminal illness diagnosis, you or your family can go through the claims process and receive the payout, which you can spend how you wish.
The time it takes to receive your life insurance payout depends on several factors, including:
It's also good to know that there's no time limit to claim on a life insurance policy. Your beneficiaries do not need to submit a claim immediately if they don't want to.
When a life insurance policyholder passes away (or is diagnosed with a terminal condition), beneficiaries need to follow a set process in order to receive their payment.
Here are the documents you'll need to submit a life insurance claim:
Once you have all these documents together, you can begin to make your claim.
The policy documents should tell you who to contact in order to make a claim.
In most cases, a personal representative for the deceased person will contact the insurer to start the claim. This could be the executor of the will, a trustee or the next of kin to the deceased.
Once you have notified the insurance company of the policyholder's death, they'll initiate the claims sequence by sending you a series of forms that you'll need to fill in.
The next stage is to complete the series of forms. You may need to submit details such as medical records to prove the cause of death. You'll also need to send the deceased person's death certificate.
Most insurance companies run their claims processes online, which can speed things up greatly.
After receiving all the necessary documents, the insurance company will go through everything to check whether they can make the life insurance payout.
They'll check that the cause of the policyholder's passing is covered by the terms of the life insurance policy. They'll also check that the deceased person kept up with their premiums while they were alive.
This part of the process can be time-consuming, particularly if the insurer needs to contact third parties such as doctors or lawyers.
If the assessment goes well and the payout is approved, as is the case in 96% of life insurance claims, the money will be transferred in around 30 days. Some insurance providers promote that they pay out claims within 5-7 days.
The payout is a lump sum and it is paid in Sterling into a valid UK bank account.
The person or party that receives the payout depends on the nature of the policy. In most cases, it's one of:
If the life insurance policy was a joint policy with another person, the payout goes to the surviving partner. Once the payout has been made, the policy expires.
The most common delays in receiving a life insurance payout are problems with the legal processes.
If the policyholder made a will, the executor must apply for a Grant of Probate before they can start administrating the deceased person's assets, including making a claim on the life insurance. Obtaining this legal document can take time, which can slow down the payout process.
On the other hand, if the policyholder has not made a will, it can make the life insurance payout process even slower. When someone passes away intestate (without making a will), someone needs to get legal permission to represent to be the deceased person's personal representative and claim on their life insurance policy. This is another time-consuming process.
Even after the insurance company has made the life insurance payout, it can take time for the money to get into the hands of the beneficiaries. This is because (unless the policy was written in trust) a life insurance payout is considered part of the deceased person's estate and could be liable for inheritance tax.
While only 4% of life insurance claims were rejected in 2023, it's possible that your policy may not pay out straight away. Reasons life insurance policies don't pay out include:
If the life insurance company refuses to pay out what you believe is a valid claim, you have the right to appeal.
Your first step should be to contact the insurance company and make a formal complaint. The insurer then has a maximum of 8 weeks to investigate your complaint.
If the insurance company do not come back to you after the 8-week period, or you're not happy with their reply, you can escalate your complaint to the Financial Ombudsman Service (FOS). This is an independent body that will look into your issue free of charge.
If the FOS believes your claim is valid, they can order the insurer to pay the full sum immediately, with extra compensation.
An effective way to get your life insurance paid quickly is to get it written in trust. You can do this when you first purchase your life cover.
When you set up a trust for your life insurance, you bypass the probate process and avoid the legal pitfalls that can delay your loved ones' claim.
In addition, when life insurance pay goes into a trust, it is not considered part of your estate and does not count towards your inheritance tax allowance.
Another great way to make it easy for your loved ones to make a life insurance claim is to ensure they understand that you have life cover and they know where all the right documents are kept. That way, when the time comes, they won't need to worry about finding the correct information.
As well as the time it takes to go through a company's claims procedures, you also need to understand payout rates. Because different insurance companies use different criteria to assess claims, payout percentages can vary significantly.
We checked out the UK's top life insurance companies to find out how often they pay out life insurance claims.
Here are the most recent figures, taken from each company's website:
Read more about the benefits of life insurance: Benefits of life insurance?
Related reading: Our expert and impartial guide to private health insurance UK
Disclaimer: This information is general and what is best for you will depend on your personal circumstances. Please speak with a financial adviser or do your own research before making a decision.
Mike is a personal finance copywriter who has written for numerous financial services publications and websites over many years.
If you're a life insurance policyholder, the best thing you can do to ensure it pays out is to keep up with your monthly premiums. Any disruption to your payment schedule could jeopardise your chances of your loved ones receiving their lump sum. You would also lose the premiums you have already paid in.
Yes. When you first take out your life insurance policy, you can decide who the beneficiary or beneficiaries will be.
If you don't state a beneficiary, the payout generally goes to your next of kin.
Your insurance company will reserve the right to check whatever they like when assessing your claim. Depending on the cause of death, they may want to check through a post-mortem report or historical medical records. This is to ensure you were not hiding any pre-existing health conditions when you first took out your life insurance policy.
When you purchase life insurance, you must be 100% honest about what you disclose. Any false or withheld information could lead to your beneficiaries not receiving their payment.
In most circumstances, it is not possible to cash in your life insurance policy so you can get the money while you're still alive. Life insurance was never supposed to be a savings or investment opportunity.
The only exception is if you have terminal illness cover, which will pay out if you're diagnosed with an incurable condition with a life expectancy of 12 months or less.
