There is a very definite reason why people purchase life insurance. It is not a light-hearted decision to make when we acknowledge our own vulnerability in that we will not live forever. Life insurance cover is purchased to make sure that if something untoward happens to us, the people closest to us who depend on us, are not left in the lurch needing money and hurting in more ways than one.
The fact that life insurance policies have taken up to four months to pay out previously is not really morally in keeping with how we believe this type of insurance should be. It is supposed to protect those nearest and dearest to us from the fall-out caused by an early demise, which is bad enough in itself, at a time when it is needed most.
The life insurance industry has now improved pay-out speeds, and payments will be made within four weeks according to new guidelines. These guidelines were published very recently by the insurance industry in consultation with the Law Commission.
There is a tsunami of red tape which beneficiaries and dependents are normally expected to wade through when claiming on life insurance policies. They will now be able to cut through these issues and all they have to do is sign a declaration. The declaration is a legally binding document which ensures dependents listed on life policies agree to pay back monies they may not rightfully receive.
Every year in the UK, 32,000 bereaved families are compelled to claim against life insurance policies. Traditionally, pay-outs on claims are held up by probate law until all the beneficiaries have been identified according to the law.
Under a recent change to the ABI’s guidelines, all named beneficiaries now have the right to claim the cash owed to them within one-tenth of the time.
The Association of British Insurers (ABI) has worked closely with the Law Commission to come up with a plausible solution. Families and dependents have traditionally had to endure hardship until such time as the lengthy legal process for a claim was, well, processed.
What we find very strange is the fact that the industry has only NOW realised that a solution needed to be sought. Certainly financial hardship on the death of a breadwinner is definitely not a new thing; in particular for lower income families.
Having to cope with bereavement is already a very difficult enough tragedy to deal with, without the additional stress of having to worry about where money for day-to-day and other expenses will come from. The new process should change all of this and alleviate some of the hardships endured by bereaved families in the past.
Scottish Widows, Aviva and Legal & General are the three major insurance firms to have already piloted this process successfully.