Buying protection

Underwriting, disclosure, and why the cheapest quote is the wrong thing to optimise for.

Protection is the one area of personal finance where buying on price alone is genuinely dangerous, because the thing you're buying is a promise to pay in circumstances defined by the small print.

Do they actually pay out?

The belief that insurers look for reasons to decline is widespread and wrong. Industry claims statistics published each year consistently show around 97–98% of protection claims paid, across life, critical illness and income protection.

The failures cluster around a small number of causes, and the largest by far is non-disclosure.

Non-disclosure: the one thing to get right

When you apply, you answer questions about your health, family history, occupation, lifestyle and pastimes. The insurer prices the policy on those answers.

If a claim reveals you didn't disclose something relevant, the insurer can reduce the payout or decline it entirely, depending on whether the non-disclosure was careless or deliberate.

The cases that go wrong are rarely people concealing something dramatic. They're people who:

Forgot a consultation years ago
Decided a symptom wasn't worth mentioning because nothing came of it
Didn't think family history counted because they're healthy themselves
Underestimated how much they drink, or how often they ride a motorbike
Assumed the insurer would find out anyway

Disclose everything, including things you think are irrelevant. If in doubt, put it in. The worst realistic outcome is a slightly higher premium or an exclusion, which is enormously better than a declined claim at the worst possible moment.

Ask your GP for a copy of your medical records if you're unsure what's on them. You're entitled to it, and it removes guesswork.

Underwriting

After you apply, the insurer assesses the risk. Depending on your age, health and the amount of cover, this may involve a GP report, a nurse visit, or medical tests.

Possible outcomes:

Standard terms — cover at the quoted price
Rated terms — cover at a higher premium reflecting higher risk
Exclusions — cover excluding a specific condition, such as a bad back
Postponement — a decision deferred, often pending investigation or recovery
Decline — less common than people expect

Underwriting varies substantially between insurers. Two will often reach different conclusions on the same person, which is the strongest argument for using a broker who can approach several.

Guaranteed or reviewable premiums

Guaranteed premiums don't change. You pay more initially and know the cost for the life of the policy.

Reviewable premiums start lower and can be increased, typically every five years. Increases tend to accelerate with age, and they arrive when replacing the cover is hardest — because you're older and your health may have changed.

For long-term cover, guaranteed is usually worth the higher starting cost, and the difference at outset is often smaller than expected.

Advised or non-advised

Non-advised — comparison sites and direct purchases — is fine for straightforward level term life cover, in good health, where you know what you want.

Advised matters as soon as anything is complicated: income protection definitions, critical illness wordings, imperfect health, self-employment, trusts, or business protection. A broker approaches multiple insurers, knows which ones treat particular conditions favourably, and handles the trust paperwork.

Protection advice is usually commission-based, meaning there's typically no direct fee. That's worth knowing — the cost is built into the premium either way, so going direct doesn't usually save you the commission.

Reviewing what you have

Protection should change as your life does. Worth revisiting on:

A house move or new mortgage
A new child
Marriage, divorce or separation
A significant income change
Changing jobs, which usually ends employer benefits
Becoming self-employed

Don't cancel an existing policy until the replacement is in force and you've been accepted. Cancelling first and being declined or rated afterwards leaves you uninsured, and older policies sometimes have better terms than anything currently available.

The practical checklist

Before applying: know what gap you're filling, know your employer benefits, and gather your medical history.

When applying: disclose everything, take time over the questions, and keep a copy of what you submitted.

After it's issued: write it in trust, tell your family it exists and where the paperwork is, and note it somewhere they'd find.

That last point matters more than it sounds. A policy nobody knows about is a policy nobody claims on.

This article is for general education only and isn't personal advice or a recommendation of any product or provider.