Australia | New Zealand

Myth Buster - 'Life Insurance Companies Don't Pay Up'

It’s a common belief among many people that you can spend years paying life insurance premiums, only to have your claim knocked back in the end. This urban myth is widely held in life insurance, as well as total and permanent disablement (TPD), trauma, and income protection insurance.

As with many myths, the truth is quite different. The Risk Store, which publishes yearly payout figures from the major life insurers, says that an average of $11.14 million per working day was handed over to support Australians in 2009. That totaled up to exceed 2.78 billion dollars.

The 2009 claims payout breakdown is as follows:

Table: 2009 claims payout breakdown of dollar figures

Table: 2009 claims payout breakdown of dollar figures

This enormous amount would not be paid at all if it wasn’t for the foresight of consumers and their advisers in protecting family lifestyles, assets and businesses from the devastating effects of illness and injuries.

The Risk Store goes further, pointing out these interesting facts:

Not one of these claimants expected to claim on their insurance.
If these claimants hadn’t received $2.78 billion from insurance policies, where else would they have got that kind of money?
This is not a one-off statistic: in 2006, 10 companies paid out $2.03 billion; in 2007 11 companies paid out $2.1 billion, while in 2008 13 companies paid out $3.05 billion.

That’s a lot of people who never expected to claim – but had to.

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