Six Myths About Insurance
Insurance is one of those topics that people often misunderstand. While it’s there to provide financial peace of mind, several myths can deter people from exploring it.
Myth 1: It won’t pay out
Many people worry that insurance companies don’t actually pay out claims. However, the reality is quite different. In 2023, 98.3% of claims were accepted, and some insurers reached over 99% payout rates.¹
Every day, UK protection insurers pay out more than £20 million to individuals and families facing critical events like accidents, illnesses, or loss of a loved one.¹ If you complete your application truthfully and accurately, the likelihood of your claim being paid is incredibly high.
Myth 2: Insurance Companies Make It Difficult to Claim
The perception of a challenging claims process is another widespread myth. The truth is, life insurance policies are designed to give you peace of mind, not stress. UK insurers have dedicated teams to help guide claimants through the process with care and sensitivity.
While no one wants to think about making a claim, these teams are there to ensure you get the support you need when the time comes.
Myth 3: Companies don’t care about me, I’m just a number.
It’s easy to feel like policies are impersonal, but many policies go beyond financial payouts. For example:
- Terminal Illness Benefits: Some policies pay out if you’re diagnosed with a terminal illness, allowing you to focus on what matters most.
- Rehabilitation Support: Certain policies offer help with recovery, such as access to specialists or therapists.
Far from treating you like a number, insurers often provide holistic support during some of life’s most challenging moments.
Myth 4: It will only pay out when I die.
This is partially true for some policies, but many offer much more than a death benefit. For instance:
- Critical Illness Cover: Pays out if you’re diagnosed with a serious condition like cancer, a heart attack, or a stroke.
- Income Protection: Offers financial support if you’re unable to work due to illness, injury, or disability.
- Terminal Illness Benefits: Provide early payouts if you’re given a diagnosis with a limited life expectancy.
Insurance can provide a financial lifeline during your lifetime, not just after it.
Myth 5: I’m covered at work, so I don’t need it
Employer-provided benefits, such as death in service, can be a great safety net, but they have limitations. For example:
- Coverage is typically linked to your salary and might not meet all your family’s needs.
- Benefits are usually tied to your employment, meaning if you switch jobs, you could lose the cover.
Having your own policy ensures continuous and tailored protection that stays with you no matter where you work.
Myth 6: I have no children, so I don’t need life insurance.
While children are a common reason to take out life cover, they’re not the only consideration.
It's a good idea to have life insurance in place if you have a mortgage. Though it's not always compulsory, some mortgage providers will insist on it as part of the agreement. If you have a partner and name them as a beneficiary in a will, or if your policy is in a Trust that they're named in, they could use the payout to cover bills, pay off a mortgage, and stay in the home after you're gone. With a Trust, as well as choosing who benefits from the payout, it won't be counted as part of your estate.
If you have a joint life insurance policy, when you pass away, the money will usually go to the surviving policyholder, unless you've made other arrangements. If you don’t have someone who is directly dependent on you financially, and you have a single life insurance policy, then people who you have declared as important to you may ultimately benefit from the lump sum.
Remember: insurance is about much more than ticking a box—it’s about securing peace of mind for yourself and those you love.
Trusts are not regulated by the Financial Conduct Authority.
¹Source: Association of British Insurers (Abi), Protection insurers pay out record £7.34 billion to support individuals and families, 02/09/2024
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By Steven James
Financial Adviser
HJP Chartered Financial Planners
To find out more about Steven, click here.
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