Unclaimed life insurance policies: we estimate billions of pounds at risk

£230.2bn worth of life insurance benefits could go unclaimed

Life insurance is one of the most important policies available. It’s a way of helping your loved ones cope with the costs that may be placed on them in the event of your death. This can include anything from paying funeral expenses to meeting the fees they could become liable for when you pass away, such as mortgage repayments.

In the UK, an estimated 19.5 million residents have bought, or thought about buying life insurance. However, millions of these policies are at risk, as many of us have neglected to tell those closest to us that we have a policy in place.

Our recent survey found that 18% of life insurance holders haven’t told their family members that they have a policy. As well as this, 35% said that their family doesn’t know how to access their policy documents. Meanwhile, a further 71% stated that the policy isn’t detailed in their will.

This means that an estimated 14.89% of policyholders haven’t provided a way for their relatives to easily access their life insurance documents. Consequently, their beneficiaries won’t be able to get the funds available to them.

In total, over 2.9 million life insurance policies in the UK are in danger of going to waste. This equates to an eye-watering £230.2bn worth of benefits at risk of being unclaimed, simply because the policyholder didn’t arrange a way for their family to make a claim.

Ensuring your beneficiaries are able to claim

Unclaimed life insurance benefits represent a significant issue, as some families will rely on these funds as a way of staying financially stable after their relative’s death.

If that applies to you, you must provide your loved ones with a way to make a claim. Once you’ve set up your life insurance, be sure to store the policy documents in a safe place, and inform your family where they can find them.

You may also choose to put your life insurance in a trust or include the details in your will. This allows you to manage the way your policy is paid to your family and ensures that the benefits go to who you wish.

Discussing this topic can be hard, and it may not seem like your main priority if you have other things on your mind. However, telling your relatives where they can find your policy information will make things much easier for them when the time comes.

Richard Jones at GoCompare life insurance said: “Life insurance can be a financial lifeline for many families after losing a loved one, allowing them to pay off a long-standing mortgage or helping them to have a secure financial future, so it is worrying that our research found that so many policies could be left unclaimed.

“It is great to see how many people have bought life insurance, but it is useless if left unclaimed, and it seems that a staggering number of policies are at risk of just that, according to our research.

“To ensure that loved ones can claim, it’s important that policyholders tell family members about their insurance. By having these difficult conversations, they can rest assured that their relatives are aware of and able to access these important documents when the time comes.”

Only 3% of people took out a life insurance policy because of Covid-19

The last 19 months have been a challenging time for everyone, with the Covid-19 pandemic reminding us not to take our health and wellbeing for granted. Despite this, very few of us made plans for the worst-case scenario. Out of those who’ve taken out a new life insurance policy since the start of the pandemic, only 3% did so because of Covid-19.

While the virus could’ve prompted us to make plans for the future, these findings suggest that this isn’t the case. The majority of those who purchased a policy during the pandemic would’ve done so anyway, regardless of the concerns caused by the coronavirus.

If you’re unsure whether you should get covered, read our answers to some of the most commonly asked questions about life insurance, below.

Frequently asked questions about life insurance

To help you get a better understanding of how life insurance works, we’ve answered some of our consumers’ most commonly asked questions.

What does life insurance cover?

Life insurance covers most common causes of death, including the likes of cancer, heart attacks and unexpected illnesses. However, pre-existing conditions usually aren’t covered, as well as deaths caused by dangerous activities and undisclosed illnesses. Every policy is different, though, so be sure to check the exact details of coverage before purchasing.

Do I need life insurance?

It’s a good idea to get life insurance if anyone is dependent on your income, or if anyone would become liable for a large financial commitment in the event of your passing. Many people decide to get life insurance after a big event such as getting married, starting a family or buying a house with a mortgage.

What types of life insurance are there?

There are various types of life insurance available, but the two most common are level term and decreasing term.

Level term insurance lets you decide the policy’s duration and payout amount. If you die within the term of the policy, your beneficiaries will receive this amount as a fixed sum. Alternatively, decreasing term policies are designed to cover debts that diminish over time (like your mortgage), so the amount paid out by the policy reduces with time.

There are also several specialist policy types on offer, such as critical illness cover, funeral cover and cover for over 50s. Like most kinds of insurance, the best policy for you truly depends on your circumstances. Before deciding on which one to get, be sure to consider which factors are most important to you.

How can I make a claim on life insurance?

To make a life insurance claim, you’ll need a completed claim form (blank forms can be obtained from the insurer), a copy of the policyholder’s death certificate, and the policy documents. If you don’t have access to the policy documents, contact the Unclaimed Assets Register, which will help you get the funds available to you.

About this data

To calculate the number of life insurance benefits at risk of going unclaimed, we ran a survey of 1,988 life insurance policyholders aged 49 and over.

In this survey, we asked our respondents whether their families were aware they had life insurance. We also asked whether they’d included details of the policy in their will and whether their family knew how to access their life insurance documents.

In total, 14.89% answered no to all three of these questions. Therefore, it was deemed that this number of people hadn’t provided a way for their relatives to make a claim.

To find out how many policies this represented, we took 14.89% of 19.5 million - the estimated number of UK residents with life insurance. We then multiplied this number by £79,304, which is the average payout of protection insurance. This gave us the total amount of life insurance benefits at risk of going unclaimed - £230.2bn.

Data sources

The estimated number of UK residents that have bought or thought about buying life insurance (19.5 million) is Canada Life data, published by the Financial Times Advisor. The average payout of protection insurance (£79,304) was sourced from ABI.