In 2014 £3.44bn was paid by protection insurers on nearly 128,500 policies, compared to £3.08bn on 98,900 policies in 2013, ABI figures have shown.
The figures for 2014 mean that the protection industry is paying £9.4m a day on 350 policies.
For term life insurance, an average of £60,944 was paid with 98.7% of the 25,018 claims made paid, the figures revealed.
Of whole of life polciies 99.98% paid out, with an average payment of £7,403, a total of £540m was paid out in 2014 compared to £450m in 2013.
For critical illness, the average amount paid was £67,039, with 92% of the 15,652 claims made paid.
The average amount paid on a individual income protection policy over the time being paid out was £39,200, over 204 weeks, with 92.9% of claims paid out.
Terminal illness cover saw 2,911 claims made, of which 93.4% were paid with an average claim paid of £98,506.
Total permanent disability insurance saw £73,241 paid on average, with 64.1% of the 707 claims made paid.
James Dalton, director in charge of protection policy at the ABI, said: "At the most stressful times, insurance can make a real difference.
"These figures show that 97.7% of all types of protection policy claims are paid allowing people to focus on other challenges.
"As well as relieving the financial strain, insurance policies can provide support during a difficult time.
"For example, income protection policies can offer rehabilitation and back to work support services.
"However, many households still have no real financial safety net.
"Each year, one million workers suddenly find themselves unable to work for more than four weeks due to serious illness or injury.
"Insurance can play a role in improving families' financial security, to help them after the loss of a loved one or support them if they are unable to work."
Further reading:
Scottish Widows pays over £190m life and CI claims
Beyond the claims stats: measuring the value of protection
Self-employed survey finds perception gap in payouts
