Post Office reveals the most common misconceptions about life insurance & finds a fifth of people with cover are unsure how the policy pays out
Almost a fifth of people (18%) with life insurance do not comprehend the conditions under which their beneficiaries would get a pay-out from their policy in the event of their death according to the Post Office. The study also revealed that around two-fifths (38%) of us are unable to correctly explain the difference between Life Insurance and Life Assurance.
According to Post Office research, the most widespread misunderstanding about life insurance has to do with how the policy pays out. Only if you have a life insurance policy that is connected to investments may this be possible, but over a fifth of respondents (21%) thought that a life insurance policy allowed the policyholder to withdraw money at any time to cover life events.
Most policies only provide a lump sum to be distributed to the designated beneficiaries following the death of the insurance holder. The policyholder may, however, specify different instructions for the payout, such as investing the money or using it to settle other debts, like a mortgage, for example.
According to the study, 53% of respondents currently had a life insurance policy in place, and 40% of them were under the age of 35. However, 18% of those with coverage said “I don’t know” when asked to explain how a policy’s payout to its beneficiaries operated. This implies that the actions policyholders’ beneficiaries would need to take in order to submit a claim and receive the payout were not clear to them.
Regardless of whether they have a life insurance policy or not, this percentage increased to 24% of respondents, which means that almost a quarter of UK citizens are unaware of the most basic principles underlying life insurance.
Despite the fact that over 77% of respondents indicated they were either happy or extremely happy with their current coverage, the Post Office figures seem to indicate that many people are not fully aware of the details of the insurance they have agreed to.
With 80% of respondents saying they were under 45 when they originally took out their policy, the research indicates that you are actually more likely to purchase life insurance while you are younger. This may indicate that many clients are aware of the fact that life insurance premiums are reduced the younger a person is.
The age range of 24-35 was the most popular for purchasing life insurance, maybe because it coincided with a number of significant life events like starting a family or getting a mortgage. The average age of firs- time purchasers in the UK has lately risen to above 30 for every region in the UK according to Halifax, and in late 2020 the average age for first-time mothers will also have risen to 30.
However, according to the Post Office survey, the life event most likely to encourage someone to take out life insurance was neither starting a family (25%) or taking out a mortgage (19%), but instead becoming financially wealthy (36%). Only 9% of participants said getting married will affect their decision to purchase a policy, making it the least likely event to do so.
The poll also showed that males are, albeit marginally, slightly more likely than women to have life insurance, with 56% of men responding that they did, compared to 51% of women.
Other Common Misconceptions
Life Insurance Covers Funeral Costs – According to 63% of respondents, normal funeral insurance coverage is provided. Funeral expenses, critical illness insurance, income protection, and medical expenses are all add-ons that are frequently omitted from regular coverage. Over 50s Post Office, The Life Cover plan offers a funeral benefit option, however, if the customer anticipates the payout to cover funeral expenses without this, they would need to make private arrangements through a Will or other means.
Life Insurance Won’t Cover You With A Pre-Existing Condition – While it may be more difficult and expensive to acquire a coverage due to a pre-existing medical condition, it is still attainable. Because specialised suppliers will have a solution for pre-existing ailments or circumstances, it is crucial for customers to comparison shop.
Life Insurance Covers You For Life – Life insurance will only provide benefits if you pass away during the term for which it was purchased, such as the duration of your mortgage. It is possible to have lifetime coverage, but this is known as whole-life insurance. Only 36% of respondents were able to distinguish the two correctly.
Life Insurance Won’t Cover Over 50s – It is still quite feasible to obtain coverage later in life, even though your age might have a significant impact on the sort of coverage you are eligible for and the older you are when you apply, the higher your premium will likely be. A lot of companies, including Post Office, provide specialised over 50’s insurance.
The information was obtained from a poll of 2000 UK adults that was commissioned by the Post Office to learn more about “The Nation’s Relationship with Life Insurance” and gauge how much people in general knew about it. A study was carried out in January 2022.
About the Post Office
- With over 11,500 branches, Post Office has the biggest retail network in the UK, with more branches than all the banks and building societies combined.
- The Post Office is assisting anyone who needs cash to obtain it in the most practical manner. 99% of UK banking customers have access to their accounts at their local Post Office thanks to partnerships with more than 30 banks, building societies, and credit unions.
- At every Post Office, you can withdraw money, deposit money, and check your account balance safely and efficiently over the counter. Additionally, 1,400 free ATMs accross the UK are being protected nationwide with the largest investment made by any organisation or business in the past ten years.
- Post Office is simplifying its proposition for Postmasters with a focus on its cash and banking; mails and parcels; foreign exchange; and bill payments
- Research has found that visits to the Post Office help drive another 400 million visitors to other shops, restaurants and local businesses equating to an estimated £1.1 billion in additional revenue for High Street businesses.
- 7% of the population live within three miles of a Post Office; and 4,000 branches are open seven days a week.