Think insurance companies don’t pay out? Here’s what the data really says

Think insurance companies don’t pay out? Think again

When you’re buying a home, a mortgage is usually the biggest financial commitment you’ll ever make. That’s why many people consider protection insurance alongside their mortgage—so that if something serious happens, the finances don’t collapse at the worst possible time.

Yet a persistent myth stops some borrowers from taking out protection: that insurers “won’t pay out” or will “find an excuse” to refuse a claim.

In practice, the protection market pays out on a large majority of claims. The more useful question is often not whether insurers pay, but why some claims don’t meet the policy terms.

Do insurers pay out on protection?

Yes. Industry statistics indicate that protection providers do pay out.

For example, the Association of British Insurers (ABI) reported that the protection industry paid out 98.3% of new claims in 2023, totalling more than £7.3 billion. (Source: ABI.)

While every policy is different, these figures suggest the “insurers don’t pay” story doesn’t match the overall claims record.

Why do some protection claims get declined?

Even with high overall payout rates, there are situations where a claim may not be paid. Most declined claims come down to the policy terms and the information provided at application.

1) Information wasn’t accurate or complete

One of the most common reasons is that the policyholder didn’t disclose relevant information when the policy was taken out—particularly around medical history, lifestyle, or other details that affect risk.

Protection policies rely on the information given at the start. If something important was missed or not stated correctly, it can affect how the insurer assesses the claim.

2) The claim doesn’t meet the policy definition

Protection insurance is designed to pay when specific conditions are met. That means the event has to match the policy’s definitions.

For example, critical illness cover is typically linked to defined illnesses and specific criteria. If the condition doesn’t fall within those definitions—or the timing and symptoms don’t align with the policy wording—payment may not be due.

3) The claim falls outside the cover period or scope

Some claims may not be paid if they relate to circumstances that are excluded, outside the insured term, or not covered under the selected product.

This is why it matters to understand what the policy does—and doesn’t—cover, rather than assuming all protection is the same.

How to reduce the risk of claim problems

Protection insurance is meant to help when life changes. The best way to protect your position is to make sure your policy is set up correctly from day one.

Be open and consistent when answering questions

When applying, take time with the lifestyle and health questions. If you’re unsure about a detail—such as the timing of a diagnosis, medication history, or past symptoms—clarify it before submitting.

Accurate information helps the insurer assess the application fairly and helps ensure the cover matches your circumstances.

Make sure the cover matches what you need for your mortgage

A mortgage is only one part of your overall financial picture. The right protection depends on factors such as:

• the mortgage amount and term
• whether you’re protecting repayments, income, or both
• your household situation
• how long you’d realistically need support if something happened

Choosing cover that aligns with your mortgage structure can reduce the chance of being underinsured or buying the wrong type of policy.

Keep the policy suitable as your life changes

Life events can affect both your needs and the relevance of your cover. Changes such as a new job, family circumstances, or health developments may mean it’s worth reviewing whether the policy still fits.

Regular review helps ensure the protection remains aligned with your mortgage and your current situation.

Is it too late to get protection?

It’s understandable to delay if you’ve heard negative stories about claims. But if you’re considering protection alongside a mortgage, it’s generally better to address it sooner rather than later.

The key point is that protection insurance is designed for the long term. If your circumstances change, a review can help you understand whether your cover is still appropriate.

Protection insurance is about peace of mind—not myths

The idea that insurers never pay out doesn’t reflect the overall claims record. The reality is more nuanced: protection policies pay when the event meets the policy terms, and problems usually arise from mismatched definitions or incomplete information at application.

For home buyers, the practical takeaway is simple: protection should be chosen carefully, set up accurately, and reviewed as life evolves—so that when you need it most, your cover is in the best possible position to help.

Related information

• ABI (Association of British Insurers) – protection claims data (external source)
• MoneyHelper – guidance on insurance and protection (external source)