Why might a whole of life policy with a sum assured of £100,000 have only paid out £55,000?

A whole of life policy typically provides a guaranteed sum assured upon death, but there are specific circumstances that could lead to a reduced payout. In this case, a situation where the policy has a sum assured of £100,000 but has only paid out £55,000 can be attributed to the imposition of a policy debt by underwriters.

When premium payments are not made on time or are insufficient to keep the policy in force, the insurer may allow the policyholder to carry a debt against the policy. This means that the insurer deducts any outstanding premiums from the sum assured at the time of payout. Therefore, if the policy had an outstanding debt of £45,000 due to unpaid premiums or costs, the payout would be reduced accordingly to £55,000 instead of the full £100,000.

This highlights the importance of maintaining premium payments in order to ensure that the full benefits of the policy are realized without any reductions due to debts incurred from non-payment.