Critical illness (CI) and life insurance claims payments reached almost £2bn last year, according to figures published by the Association of British Insurers (ABI).
Insurers paid out £1.9bn in 2010 - up from £1.8bn the previous year - with £1.14bn coming through life insurance and £776m from CI.
However, while the total payout rose from 2009, the rate and value of CI claims paid dipped slightly last year.
Whereas some £776m was paid out in 2010, the value of payouts in 2009 was almost 5% higher at £813m. The total value of CI claims in 2008 was £829m.
The ABI said it believed the decline was due to customers cancelling their policies because of tighter household budgets.
Meanwhile, one in ten (10.1% of 1,248 claims) of CI claims were declined in 2010 compared to a slightly lower 9.7% in 2009.
Some providers have already released their CI claims statistics for the first half of 2011, with rates ranging between 93% and 89%.
Last year also saw a smaller volume of claims received by the ABI's members - 11,161, down from 11,816.
More than 40,000 payments were made during the year with an average value of £47,166, - almost double the UK average salary.
The ABI recently issued a statement of best practice to help insurers provide consumers with a better understanding of how CI policies work and what they are covered for and also produced guidance to speed up life insurance payments.
It noted that this is already starting to have an impact and the benefits to consumers were being studied.
Maggie Craig, director of life and savings at the ABI, said: "Critical illness and life insurance policies are crucial in helping people during some the most difficult times in their lives and can play a key part in the financial support needed.
"The industry continues to work closely with its members to ensure that all claims are handled as quickly and as sensitively as possible, making a real difference to people's lives at the most difficult of times.
"Insurers recognise that financial hardship can arise due to the lengthy legal process associated with sorting out a deceased person's estate as well as coping with the effects of living with a serious long term health condition.
"Insurance companies want to pay valid claims as quickly as possible and continue to look at ways to reduce the number of unaccepted claims," she added.
