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A guide to mis-sold life insurance policies

Find out about mis-sold life insurance and what you can do if you think an insurance policy has been sold to you unfairly.

Find out about mis-sold life insurance and what you can do if you think an insurance policy has been sold to you unfairly.

Written by
Tim Knighton
Life, health and income protection insurance expert
Reviewed by
Faith Archer
Insurance expert
Last Updated
6 JUNE 2023
4 min read
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What is mis-sold insurance?

Insurance is considered to be mis-sold when the customer hasn’t been given accurate information and advice about how the policy works. Insurance providers have a duty to make sure the insurance they’re selling is suitable for a consumer’s needs and circumstances.

How can an insurance policy be mis-sold?

There are many ways an insurance policy can be mis-sold. These include not having the risks explained, being given unsuitable advice or not being given relevant information, so you end up with a policy that doesn’t meet your needs.

Examples include: 

  • You were pressured into buying the cover because you were told, or it was strongly implied, that you didn’t have any choice.  
  • You were recommended, and then sold, insurance where the terms and conditions weren’t explained properly. 
  • You were sold a policy you wouldn’t be able to claim on, such as an income protection policy while you were unemployed or retired. 
  • You were sold a policy that didn’t give you the cover you were promised. 
  • You weren’t told about additional charges for advice. 

How could a life insurance policy be mis-sold?

One way a life insurance policy could be mis-sold is if you were persuaded to buy a complex or expensive policy without being told about a simpler, less expensive type of cover. For example, if a provider only told you about a whole of life insurance policy, instead of cheaper term cover.  

It could be the case that, by not making clear there were other more suitable life insurance options, you’ve been misled by the provider. 

What should I do if I’ve been mis-sold a life insurance policy?

First you need to complain to the insurance provider and give them the chance to put things right. Most complaints should be sorted out this way.

These are the steps to take:

  1. Write down the reasons you think the policy was mis-sold.
  2. Collect evidence to back up your case, including any details of how you bought the policy and what you were told by the provider at the time.
  3. Complain to the provider who sold you the insurance policy. You can usually find out how to make a complaint from the documents you were given or from the provider’s website. Make sure your letter or email clearly states the factual reasons you think your policy was mis-sold. Include a copy of any proof of the mis-selling – don’t send the originals.
  4. Keep copies of the correspondence and a record of any phone conversations about your complaint, including dates, times and names of anyone you speak to.

The provider is required by law to deal with the complaint within eight weeks of receiving it. They’ll write to you with their response to your complaint and how they intend to resolve it. The letter should also tell you how to take the matter further if you’re still unhappy.

For more help, see the Financial Ombudsman’s guide to making a complaint about a financial business.

What can I do if my mis-selling complaint is rejected?

If your complaint is rejected the first time, you can try again – claimants are sometimes successful on appeal.

If that fails, you can lodge a complaint with the Financial Ombudsman for something that happened up to six years ago – even if you’ve finished paying your premiums and aren’t insured any more. Don’t delay – you can only go to the Financial Ombudsman within six months of the insurance provider’s final response to your complaint.

Read examples of how complaints about whole of life cover were resolved by the Financial Ombudsman.

Can I get compensation for mis-sold life insurance?

Yes, if your claim is successful, you should get a refund of the premiums you paid plus interest charges.

If it turns out that the insurance provider or financial advisor that mis-sold your policy has gone out of business, you can complain to the Financial Services Compensation Scheme instead.

Should I use a claims management company?

This is entirely up to you. However, most of these types of organisations, which operate on a ‘no win, no fee’ basis, will take a large slice of any compensation you receive.

The system is designed so that people can make claims themselves. If you do, you won’t have to hand over any of the compensation you receive for being mis-sold. And remember, you’ll have to dig out all the paperwork for the claims company in any case.

What can I do to avoid being mis-sold life insurance?

We all have better things to do with our time than sorting out life insurance mis-selling, so it’s good to know how to avoid it happening to you in the first place.

  • Don’t rush into buying life insurance. If someone tries to pressure you into buying, walk away and find a different advisor or provider who’ll answer your questions and explain what you need to know at your pace.
  • Make sure you read the documents and understand what you’re buying before you sign on the dotted line. For example, make sure you understand:
    • What you’ll be paying
    • If the price can go up
    • What happens if you miss a payment
    • When the policy will pay out and when it won’t
    • Who the pay-out will go to and whether that can be changed.

If you’re still not sure whether a policy is right for you, you may want to get expert advice from a solicitor or tax advisor.

See more about what you need to know in our guide to life insurance.


Frequently asked questions

I was told I had to have life insurance with my mortgage. Have I been mis-sold to?

It depends. Some mortgage providers won’t lend to you unless you have life insurance in place, but they should allow you to find your own cover from a provider of your choice.

If the mortgage provider insisted you get your policy from a particular provider, or they told you what kind of life cover you had to have, you may have been mis-sold.

This might be the case if, for example, you had a repayment mortgage where the amount you owe decreases over time, but the provider insisted you have a level-term policy where the pay-out remains the same. Your adviser or provider should discuss all options with you so that you can choose the most suitable.

I think I was mis-sold because the adviser earned more commission on the policy. Is this possible?

It shouldn’t happen, but unscrupulous advisers in the past may have done this.

Financial advisers and insurance providers should fully explain all the options to you when you want to get a life insurance policy. They shouldn’t be swayed by the amount of commission they could earn by recommending a particular product.

If you suspect you were mis-sold an unsuitable policy for this reason, then you should complain to the company concerned.

What happens if the company that mis-sold me insurance is no longer in business?

If the provider or adviser was regulated by the Financial Conduct Authority (FCA) and has now gone bust, you should complain to the Financial Services Compensation Scheme (FSCS).

The FSCS deals with all complaints regarding mis-selling by regulated companies that are no longer trading. They may be able to pay the compensation you’re owed if your complaint is upheld.

If the company that mis-sold you insurance has been bought by another insurance firm, then it’s likely that the liability has passed over to the parent company and you should complain directly to them.

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