Protection policies prove significant

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Protection policies prove significant

Payouts to protection policy holders in 2014 saw an increase in both size and number of recipients, highlighting the vital role it plays in helping people cope with life changing events, James Dalton has said.

“At the most stressful times, insurance can make a real difference. These figures show that 97.7 per cent of all types of protection policy claims are paid. As well as relieving the financial strain, policies can provide support during a difficult time,” the ABI director of protection policy said.

Figures published by the trade organisation revealed that £3.44bn was paid in 2014 to 128,500 customers or families. This was a rise from £3.08bn in the previous year, which helped 98,900 people.

According to ABI, insurers pay out every day on average £9.4m to help more than 350 individuals and their families cope with the financial difficulties caused by death, serious illness or injury.

The data showed that 99.98 per cent of whole life insurance policies were paid out, with the average claim payment of £7,400, a rise from £450m in 2013 to £540m.

The average payout on a term life insurance policy was £60,900, with 98.7 per cent of claims paid, and £1.5bn in claims paid out in 2014.

The data also revealed that the average individual income protection policy pay out, lasted 204 weeks, and was worth £39,200, and 92.9 per cent of claims were paid out.

The average pay-out in 2014 for critical illness was £67,000 and total permanent disability claims averaged £73,200 with 64.1 per cent paid out in 2014.

A survey by Sussex-based Drewberry Insurance earlier this year highlighted the skepticism people often attach to the insurance industry.

Those surveyed believed that only 50 per cent of life claims were paid out by the top five UK insurers in 2013.

The average payout rate submitted to five of the biggest insurers - Aviva, L&G, LV, Scottish Provident and Friends Life - was 99 per cent.

Tom Conner, director of Drewberry, said: “The truth is that these policies do pay out and they save many people from financial crisis when the family breadwinner can no longer earn a salary, so advisers need to shout this from the rooftops. Relying on savings, state handouts or work sick pay is not going to be enough if people are ill long term.”

Adviser View

Damian O’Connor, director of Hampshire-based Roxburgh Financial Management, said: “These figures highlight that policies do pay out, and that there are many types of policies available to suit people’s differing needs.

“Life insurance, most people’s first choice, may not be the right option when compared to income protection or critical illness cover, so that’s where an adviser can really add value and help show clients that it is arguably the most essential part of the financial planning process.”