Do protection policies pay out as we expect them to do?

  • Shunil Roy-Chaudhuri, Personal Finance and Investment Writer
  • 30 August 2023
  • 5 mins reading time

We take out insurance to reduce the risk of unforeseen events impacting negatively on the financial wellbeing of ourselves and our loved ones. We seek reassurance that our nearest and dearest will be protected, along with ourselves, should the worst happen. This could include an illness that stops us working or even the financial impact of death.

When we take out insurance, we also seek reassurance that the insurer will pay out on claims as we might expect them to. In this regard, you may gain some comfort from Association of British Insurers (ABI) data regarding protection insurance payouts made in 2022 (1).

This data shows that 97.5 percent of new claims made across all protection categories received a payout in 2022, amounting to £6.85 billion in total. These insurance categories include life cover and health cover (in the form of critical illness insurance, income protection insurance and total permanent disability insurance). You can get more information about some of these types of cover in our article on protection.

Payout rates on protection insurance

More specifically, there was a 99.99 percent payout rate for whole of life cover, which can be suitable if you want to provide your dependents with a lump sum on your death. This high rate is unsurprising, as the insurer offers a guaranteed payout on death for this type of protection.

But ‘term life insurance’ also had a relatively high payout rate, of 96.9 percent. If you want temporary protection for a specified period of time, then this kind of insurance could be appropriate.

Turning now to health cover, we note that 91.6 percent of critical illness insurance claims received a payout in 2022. Critical illness policies pay out if and when you are diagnosed with one of a set list of conditions covered by your policy. They can be suitable if you want a lump sum or regular income in the event of suffering one of these conditions, perhaps to pay for medical costs or to pay off a mortgage.

Meanwhile, 84.4 percent of income protection insurance claims paid out in 2022. Income protection insurance (also called permanent health insurance) is designed to help you if you can’t work because you’re ill or injured. It can be suitable if your aim is to ensure you receive a regular income until one of several situations occurs, such as retirement or a return to work. See our article on income protection insurance for more information.

Finally, 70.3 percent of total permanent disability insurance claims received a payout. This benefit pays a lump sum or lifelong payments to policyholders who become permanently disabled.

Payout rates on other insurance

Overall, payouts on protection compare very favourably with some other types of insurance. In 2020-21, 79 percent of domestic property insurance claims had a payout, while the figure was 81 percent for travel insurance. But payout rates for private motor insurance, at 97 percent, were more comparable with those for protection insurance (2).

When reviewing your protection needs, it is important to consider your financial circumstances holistically and professional advice could be invaluable here. At Schroders Personal Wealth, one of our principles is to conduct regular reviews of your finances; setting up the right protection is a vital part of this process.


(1), ‘Protection insurers pay out £6.85 billion to support individuals and families’, 30 May 2023.

(2), ‘Claims acceptance rates 2020-21’, 21 August 2023.

Important information

Protection policies have no cash-in value at any time. If you don’t pay your premiums on time your cover will stop, your benefits will end, and you’ll get nothing back. If the benefit amount has not been paid out by the end of the selected term, the policy will end and you’ll get nothing back.

Fees and Charges apply at Schroders Personal Wealth.

Any views expressed are our in-house views as at the time of publishing.

This content may not be used, copied, quoted, circulated or otherwise disclosed (in whole or part) without our prior written consent.

In preparing this article we have used third party sources which we believe to be true and accurate as at the date of writing but can give no assurance or warranty regarding the accuracy, currency or applicability of any of the contents in relation to specific situations and particular circumstances.

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