Life insurance - Mis-sold policy

As with any insurance policy, you should be clearly advised on a policy prior to the point of purchase. If you feel you did not understand the policy you were applying for, thought that the policy would provide different cover to what it actually does, didn’t take out the policy yourself at all, have been misled or have been poorly advised, you may have been mis-sold the policy.

If you believe you have been mis-sold a policy, you should use Resolver to contact your insurer. If your insurer cannot resolve the matter, you can contact the Financial Ombudsman.

If the Financial Ombudsman decides that your policy was mis-sold, the Financial Ombudsman will normally say that the business has to pay back a certain amount of the premiums you have paid. The business may also have to pay you compensation for any trouble or upset caused.

Life Insurance policies cover a range of options:

Critical Illness

While critical illness cover is often sold with life insurance, it’s important to note that they aren’t the same thing!

Critical illness insurance covers you in the unfortunate event that you happen to get one of the serious medical problems that are in your policy. The policy will pay out a single payment and then end (although policies will occasionally make a smaller payout for less severe conditions or in the event that one of your dependents has one of the listed conditions).

These policies normally include heart attacks, strokes, cancer, permanent disabilities and multiple sclerosis. 

Unlike life insurance, critical illness cover doesn’t pay out when you die. You should also be aware that you can’t retrospectively take out critical illness cover – meaning you won’t be covered for any illness or condition you know you already have.

Funeral Plans

In a funeral plan, you either pay a lump sum or instalments to the plan provider or funeral director.

Any money you pay into the fund will be invested into either a trust fund with trustees or into an insurance policy which will pay for the funeral.

Some funeral plans are regulated by the Funeral Planning Authority (FPA) -  but this is an opt-in scheme and the FPA has no substantive legal powers to enforce its rulings.

Funeral plans are not regulated by the Financial Conduct Authority (FCA) or any other statutory regulator. 

A funeral plan may look like an insurance product, but the law says that funeral plan providers don’t have to be regulated by the FCA if they put their customers’ money into a trust or a “whole of life” insurance policy.

Term Assurance 

You pay into an account for a set amount of time. In the unfortunate event of you passing away, the policy will pay out. If this doesn’t happen within the set term, it rolls over. These are regulated, and are reviewable, usually at the 10-year point. 

A term assurance policy is usually offered to cover a debt or a financial commitment, for example a mortgage.

Some policies have values, but don’t assume that yours does! If it does have a value, it’s dependent on investment performance.

Terminal Illness

These policies pay out a lump sum in the unfortunate event that you are diagnosed with a terminal illness and, sadly, have a life expectancy of less than 12 months.

It’s worth knowing that a terminal illness is defined as one that is, sadly, expected to lead to death within 12 months, and that has no known cure or has progressed to a point where it is no longer curable.

These polices are not a stand-alone product – you’ll normally find them included in life insurance or critical illness policies.

You can’t normally make a terminal illness claim after the insured person has sadly passed away.

It’s worth knowing that some terminal illness policies require that you live for at least 28 days after you’ve been diagnosed in order to be eligible. Double-check the fine print of your policy to make sure.

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