Thousands of people worldwide have already died from COVID-19, the disease caused by the novel coronavirus. As a result, many Americans have started ‘panic buying’ life insurance causing life insurance policy purchases to drastically increase.
To avoid confusion and ‘panic buying’ we have compiled a list of questions that you may have about your current life insurance policy or what you need to know when purchasing a policy during this global pandemic.
Will my life insurance policy cover COVID-19?
Yes. As long you have an active life insurance policy in good standing, your beneficiary or beneficiaries will get a death benefit should you die of coronavirus-related complications.
In addition, your insurer cannot change your premiums or your health classification. That holds even if you have COVID-19, or are at higher risk of exposure due to your job or recent travel to a virus hot spot.
Potential exceptions:
- Submitted an inaccurate or incomplete application. Claims can be denied for reasons like not disclosing travel plans or lying about weight or income. A company can refuse to pay a claim if false information is found on the application even after the two-year life insurance contestability period ends.
- Didn’t pay insurance premiums. If your policy lapses for nonpayment and you die before the policy is reinstated, your beneficiary usually won’t receive a payout. When a premium payment is late, life insurance companies often offer a grace period of 30 or 31 days. Your coverage will continue as long as you pay the insurer during this time. If you’re having trouble making payments, contact your insurance company before your premium is late. Otherwise, your insurance coverage will end until you apply for reinstatement and your insurer agrees.
- Bought only an accidental death policy. Accidental death and dismemberment insurance, or AD&D, is designed to cover accidents. It doesn’t pay out if you die of illness or disease. Sometimes AD&D coverage is added to a standard life insurance policy as a rider. In that case, the underlying traditional policy would still pay out for a death from COVID-19.
What if I don’t have life insurance? Can I get it during the pandemic?
Yes. Insurers continue to offer new whole life and term life policies.
“We have seen an increase in life insurance applications, perhaps as a result of the pandemic,” says Gina Morss-Fischer, a public affairs specialist at State Farm.
However, getting covered could take longer, particularly if you are in a high-risk group, have recently traveled to a hot zone or had COVID-19 yourself. It has become common for survivors of COVID-19 to have their life insurance application postponed to prove they are fully recovered.
Nationwide, for example, will consider a policy for someone who tested positive for COVID-19, but did not need hospitalization, once they’ve been symptom-free for 30 days. If the applicant was hospitalized, the waiting period is six months, a company spokesperson said.
Can my application be postponed or rejected due to the pandemic?
Your life insurance application could be postponed or rejected depending on your travel plans, age, or if you have received a positive COVID-19 diagnosis.
Some insurers will postpone application approval if you have returned from travel outside of the U.S. within the last 30 days or have plans to travel abroad. Additionally, they may postpone your application if a member of your household has recently returned from travel outside the U.S. If you travel, you’ll be evaluated on a case-by-case basis. Each insurer has their own specifications on how they underwrite.
If you are older or have certain medical conditions that could make you more susceptible to the coronavirus, you may see some newly imposed restrictions when applying for life insurance. Most life insurance companies haven’t changed their approach to policy offerings, but a select few have adjusted their maximum applicant age and insurable underlying health conditions, which could make you ineligible for life insurance if you shop with the wrong insurer. Be sure to work with one of our independent advisors who will help you find an insurer that’ll work with your specific profile.
How each life insurance company will treat your application if you happen to contract the coronavirus also varies. Insurers may postpone your offer for up to 90 days or until you have made a full recovery. Depending on how severe your coronavirus symptoms were, some insurers may postpone your application for up to six months. If you have come into close contact with someone who has tested positive for COVID-19, you may also be required to postpone your application or provide a statement of good health for a new or pending life insurance application.
Will my life insurance premiums be impacted by the pandemic?
Similar to any other medical diagnosis, the severity of an illness could impact your life insurance rates when you’re applying for a policy. While simply getting a virus — such as the seasonal flu — won’t cause a price hike in your life insurance premiums, some of the long-term side effects of getting ill can.
If you were to contract the coronavirus and it caused long-term health problems before you applied for life insurance, you might end up receiving a lower health classification and a more costly life insurance policy.
For the most part, however, if you get ill, make a full recovery, and later apply for life insurance, you can expect that the price difference in life insurance premiums will be minimal. And, as we mentioned above, if your policy is already in force and you contract the coronavirus, there won’t be any impact on your premiums.
Will COVID-19 have an impact on life insurance requirements in the long term?
It’s too early to know for certain. Some recovered patients are said to have suffered lasting lung damage, but medical professionals will need more time to assess the true long-term impact of the coronavirus. If there are lasting consequences, life insurers may incorporate that information into their underwriting standards, which could affect the cost of coverage for COVID-19 survivors.
According to some researchers, it’s also possible that COVID-19 could last beyond the current pandemic and join the established family of respiratory illnesses that we deal with every season. Depending on how quickly and effectively new treatments and vaccines are developed, the threat of a recurring COVID-19 season might mean higher costs in life insurance.
Does the current coronavirus pandemic make it more important to have life insurance?
We don’t think that COVID-19 significantly changes the answer to whether you need a life insurance policy. However, we believe that life insurance is necessary for anyone whose death would result in financial strain for another person.
Anyone who provides care or financial support to their family members should have enough life insurance to replace that support for as long as it’s needed. Married couples — even those without kids — can also use life insurance to ensure that each spouse can maintain their joint standard of living even if the other passes away.
If you aren’t married and don’t have any dependents, life insurance is probably not essential for you. However, consider that your situation may change in the near future. If you have a parent whom you expect to support in their old age or a significant other whom you plan to marry, those situations may justify obtaining coverage ahead of time.
Let us help.
Don’t panic about your current life insurance policy, or about purchasing a new one. We’re here to help.
With all the factors to consider with selecting the type of policy you need, the amount of coverage to protect your loved ones, and which insurance company is strong and stable enough to be around for the next 30 or 50 years, it can be very helpful to seek the advice of a licensed insurance advisor.
You should never expect to do this on your own. If that’s your preference, you can certainly obtain coverage on your own. However, given the complexity of the life insurance market, and the importance of selecting a policy with the appropriate terms and conditions so that it responds when needed, you might want to consider the help of a licensed advisor.
If you’d like to learn more, contact one of our Licensed Advisors.