Mis-Sold Life Insurance: Your Rights Explained

A significant proportion of the adults in the UK have some sort of life insurance policy. For many people, this gives them an added sense of security that their loved ones will be financially taken care of, in the event of their death.

As you would expect, the vast majority of life policies of this type are sold in the correct manner, but as we have seen with so many other types of insurance and financial products in recent years, they can also be mis-sold.

In this article we will explain what could constitute a mis-sold life insurance policy and, if you feel you may have been a victim of this type of financial mis-selling, what you can do to make a claim.

What Is Life Insurance?

A life insurance policy generally covers an individual (or a couple, in the case of a joint life policy) for a set amount of death benefit over a set number of years, in exchange for paying a monthly premium to the insurer.

For example, a couple may decide to purchase a joint life cover policy of, say, £200,000 over a 20 year term, to be payable to the survivor in the event that one of them dies during that time period.

This could provide both of them with a level of reassurance, that the one left behind will have some additional financial stability to pay their bills or pay off their mortgage etc should the worst happen.

There are many different types of life insurance, from whole of life policies to shorter ‘term’ policies, for individuals, couples and even those set up to protect a key person within a business.

Taking out life insurance is often a sensible and well-considered financial choice, but sadly there are insurers, mortgage companies and brokers out there that have fallen foul of the rules and guidelines set up to protect customers and have mis-sold policies across the UK and beyond.

What Is Mis-sold Life Insurance?

In simple terms, mis-sold life insurance refers to a policy that was sold to you using pressured or hard-sales tactics, being told you had to have life insurance when you did not, or selling you a policy that was unsuitable for your needs. If any of these apply to you, then you may be eligible to make a claim.

3 Being Sold An Unsuitable Policy

This particular category of financial mis-selling covers a number of different situations.

• Were you offered only one type of life cover (such as whole of life cover), or were other options discussed (such as the cheaper term assurance or decreasing term assurance)?

The premiums paid for different types of life insurance products vary wildly, so were you given all options or sold a product that financially benefitted the salesman instead of you?

• Was the term of your life insurance policy longer than the term of the loan for which it was set up to cover?

For example, you had a 25 year mortgage and decided to cover it with a life assurance plan, but the salesperson advised you to have a 30 year life cover policy, or perhaps even a Whole of Life policy instead? Was the insurance policy due to end at the same time as your mortgage or were you paying for extra years of cover?

This mis-match in itself does not necessarily mean the policy was mis-sold, however, the key thing here is whether or not you agreed to wanting the life cover for longer and had all the facts to hand before you made a decision.

• Were all the key features of the policy fully explained to you, including any claim exemptions or minimum contract/payment period?
• Were you aware that if you stopped or defaulted paying premiums, then the life cover would cease, and no refund would be made? Also, that a replacement policy in these circumstances would likely cost more, as the ages of those insured affects the premiums as well as their health status etc.
• Were you sold Critical Illness Cover as a bolt-on to your life insurance policy, and later found out that you could not claim for a pre-existing medical condition?
• Were you informed of the fees/commission that the salesperson would receive for selling you the life assurance policy?
• Did you already have life cover elsewhere that suited your needs and you did not actually need or want another policy?
• Were you over-insured? Were you sold a policy with an exaggerated level of death benefit for your circumstances? Did the broker push for you to have as much cover as possible regardless of how much you actually needed?

If any of the above scenarios sound familiar, you may be able to make a claim for a mis-sold life insurance policy. If successful, your claim could include a refund of premiums paid, plus interest and/or compensation.

Were You Mis-sold Life Insurance With Your Mortgage?

As mentioned above, it appears that many customers were mis-sold their policy by being told they must have life cover as a condition of their mortgage acceptance, when in fact there should have been no legal requirement to do so.

Having a joint life cover policy to pay off a mortgage in the event that one of you dies during the mortgage term is often a sensible and recommended course of action, but if you were forced to do so by the mortgage provider, then you may have grounds for a financial mis-selling claim.

You could have an even stronger case if your mortgage provider insisted the life cover policy was bought through a particular insurer, or if they stipulated the type of cover you must have.

For example, if you had a repayment mortgage (where the amount you owe reduces each year), then a decreasing term assurance plan may have been the most suitable type of life cover.

The amount of life cover provided by this type of ‘decreasing’ plan also reduces each year, so would be cheaper than a level term assurance policy (which keeps the same level of cover throughout).

It has been suggested that some brokers even sold Whole of Life policies to mortgage customers, which by many standards would be questionable financial advice in those circumstances.

It is the duty of all insurance providers to fully explain all the options available to you, if you want to commence a life insurance policy. They should act in your best interest at all times, and not be swayed by the amount of commission they receive from recommending a particular product.

What Can I Do If I Have Been Mis-sold A Life Insurance Policy?

If you have been mis-sold a life insurance policy, Claims Compass can help get your claim moving.

Being mis-sold any type of financial product is naturally a cause of concern for most people and, if you have a valid claim, it is your right to seek the recompense you deserve.

All too often, victims of financial mis-selling are left with the unenviable task of sorting out the whole issue for themselves, navigating the frequently time-consuming process of making a claim and wondering if you have really given yourself the best chance of success.

On the other hand, if you would prefer to offload some of this concern and seek assistance, you can! Many claimants choose to instruct a professional to help them instead. You can too, if you wish.

We can arrange a no-obligation call from an experienced claims advisor ready to discuss your case further. They can help to establish if you have a valid claim and, if so, take care of most of the claims process on your behalf.

They have in depth knowledge of dealing with financial mis-selling claims such as those described in this guide and will aim to get you a positive outcome in the shortest time possible, using their expertise in this field. And, you may be relieved to hear that you will usually be able to proceed on a ‘no-win no-fee’ basis.

Of course, you may decide you would prefer to handle the claim yourself if you have the time and confidence in such matters, and are fully entitled to do so if you wish. If you choose this option, the recommended steps are as follows ..

• Collate all copies of correspondence relating to when you originally started the policy and have a clear narrative in your head as to why you believe the policy was mis-sold to you.
• Write to the original insurance provider stating the reason/s why the life insurance policy was mis-sold and provide them with paper copies of any evidence. Be clear on how you wish them to resolve the matter.

Generally speaking, the insurer should investigate your complaint and reply within 8 weeks.

• If they reject your request, you should be given the opportunity to appeal.
• If they reject your appeal, you can make contact with the Financial Ombudsman and ask them to get involved. Note, however, they will only consider a claim if the mis-selling happened in the last six years and only if you contact them within six months of the final decision given by your insurer.

If you are happy with the outcome, great. If not, you can ask the Ombudsman to reconsider.

• If you are unhappy with the final decision from the Financial Ombudsman, then your only option at that point is to take the matter to court. Of course, you would then need to weigh up the financial benefits of winning your case compared to the costs of taking legal action in court. This could be costly, so legal advice may be required.

It is important to remember that life insurance policies can be extremely beneficial and provide financial security for loved ones in the right circumstances. You should also consider whether a change of life cover amount or the type of policy you have is the ultimate aim of your action/claim, rather than a complete cancellation of a policy.

This is where an individual discussion with a claims advisor, as offered by Claims Compass, may be the recommended starting point on your claims journey.

Questions And Answers

2 Can You Claim Back Life Insurance Payments?

Yes. If you were mis-sold your life insurance policy and can prove it, you may be able to claim back the premiums paid, plus interest. Our online guide explains what constitutes financial product mis-selling and details the action you can take if this applies to you.