Many people wrongly assume that financial protection rarely pays out. While this is untrue, there are times when claims are rejected, and there might be steps you can take to reduce the chance of it happening.
Financial protection is a type of insurance that pays out when certain conditions are met. For example, income protection would pay you a regular income if you were unable to work due to an accident or illness. Appropriate financial protection could provide a vital safety net when you need it most.
According to figures released in July 2025 by the Association of British Insurers (ABI), providers collectively paid out a record £8 billion through financial protection in 2024. More than 96% of claims resulted in a payout.
However, there was a significant difference in the percentage of claims paid out between the types of financial protection. For example, 99.9% of whole of life insurance claims were paid, compared to 80% of income protection claims.
Your claim being rejected when you’re facing a shock could mean you struggle financially and place unnecessary stress on you at what might already be a difficult time.
So, what are some of the reasons financial protection claims are rejected, and how can you minimise the chance of it happening to you? Here are three reasons why a provider might reject your claim.
1. Giving your provider incorrect information
When you’re taking out financial protection, you might be asked questions about your lifestyle, such as whether you smoke, how much alcohol you drink, and your weight.
It can be tempting to be dishonest when answering these questions, as some responses could increase the cost of financial protection, or because you’re worried about how you’ll be perceived.
Indeed, according to a September 2025 article published by Cover Magazine, 38% of UK adults admit to being dishonest about their alcohol consumption on medical forms. 15% said they did so because they didn’t want to be judged by a medical professional, and a further 10% said they felt pressure to appear healthy.
Failing to disclose lifestyle habits could mean your claim is rejected. For example, if you state you have never smoked and this isn’t the case, you may not receive a payout after developing an illness as a result of smoking.
Be transparent with your provider, or it could leave you without an expected payout when you need it most.
In addition, mistakes on your application could be misconstrued and result in your claim being rejected. So, take time to carefully check your paperwork for errors.
2. Failure to disclose pre-existing conditions
Again, to avoid higher costs or difficult conversations, some people don’t disclose pre-existing conditions, which could mean their cover isn’t valid. According to the ABI, non-disclosure is one of the most common reasons for declined claims.
Failing to disclose your medical history could result in your claim being rejected, even if it’s not directly linked to your pre-existing condition.
3. Your cover isn’t as comprehensive as you believe
Another common reason for a declined claim, according to the ABI, is that the financial protection doesn’t cover what the claimant thinks it does. This highlights the importance of reading your paperwork carefully and choosing an option that covers your needs.
For example, critical illness cover would pay out a lump sum if you’re diagnosed with a condition that is listed within your policy. It won’t cover every illness, so it’s essential to check exactly what your cover includes, as policies vary between providers.
Similarly, income protection usually has a deferment period – the length of time you must wait after becoming ill or injured before you can claim. This can typically range from a few weeks to a year. As a result, you should ensure you have other ways to meet your outgoings, such as an emergency fund, to cover the deferment period.
Contact us to talk about your financial safety net
Please get in touch to talk about how you could create a financial safety net, including the right financial protection for your circumstances. We can explain the different options and help you calculate how much cover you need.
Please note: This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.
Note that financial protection plans typically have no cash in value at any time, and cover will cease at the end of the term. If premiums stop, then cover will lapse.
Cover is subject to terms and conditions and may have exclusions. Definitions of illnesses vary from product provider and will be explained within the policy documentation.
