1. Concealing information on your application
The main reason insurance providers don’t payout is because of fraud or non-disclosure. When applying, you should read the questions thoroughly and ensure that you’ve answered truthfully. Lying about your health and lifestyle might make the premium cheaper but it could void your policy entirely if you need to make a claim. Be aware that you should also disclose any high-risk hobbies that you have, such as skydiving. If you die while doing any high-risk activities that your insurer isn’t aware of, they might refuse your claim.
2. If you commit suicide
The majority of life insurance policies will refuse to pay out if the policyholder takes their own life within the first 12 or 24 months of taking out the plan. This is to prevent people from taking out policies with large payouts and then taking their life to get their family out of debt. Many insurers will pay out after the first year is up, however, the claim can still be rejected if the policyholder has withheld information about their mental health.
3. If you have a terminal illness
Most insurers define terminal illness as a rapidly growing sickness where you’re expected to live less than 12 months or a sickness that has no known cure. In most cases, you’ll be able to claim an early payout lump sum but at a percentage reduction depending on the time remaining on your policy. However, if you develop a terminal illness within 12 months of the plan ending, the insurer isn’t obliged to pay out early, only when you die.
4. If your circumstances change and you don’t inform your insurer
You’ll need to keep your insurance provider up to date with any changes in your life such as getting married, having children, moving house or changing jobs. If you move house and have a bigger mortgage or change jobs and have a higher income, it’s likely that you’ll need to increase your level of cover or change it entirely. If you don’t update the terms of your policy or switch to a better one, you’ll probably be underinsured. Also, if you’re diagnosed with a life-shortening illness but don’t let your insurer know, your claim could be refused.
5. If you move or travel abroad
Some life insurance policies may become void if you live in or travel to certain predetermined geographical locations for a specific amount of time. Typically, insurers don’t like it if you’ve lived or travelled outside the EU, Canada, Australia, New Zealand, the USA, the Isle of Man or the Channel Islands for longer than 12 months.
6. You outlive your policy
The most common reason life insurance doesn’t payout is that the policyholder outlives their term life insurance policy. This type of insurance protects you for a fixed number of years. If you don’t die within the term, your insurer won’t payout.
7. Failing to pay
If you fail to keep up with the monthly payments and your policy lapses, your insurer won’t pay out when you die. Most companies offer a 30 day grace period and allow you extra time to make the payment, your policy is still in place during this time but if you don’t pay the premium your policy will end.
Whilst it’s rare for life insurance claims to get rejected, you can make a complaint if it is. Firstly, you should put a complaint in directly to the insurance provider using their dispute process. If it’s still not resolved, you can take your case to the Financial Ombudsman Service (FOS), an independent body who will take a look into the claim and decide whether the refusal is fair or not. If the FOS find that your claim should have been accepted, they can make the insurance provider pay compensation or take steps to alter the outcome.