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Has the rapid spread of the novel coronavirus got you thinking about life insurance?
You might be wondering if your existing policy covers you, or what happens if you apply for coverage now.
What Is The Coronavirus Or COVID-19?
Coronaviruses are a family of viruses that affect people of all ages. It causes respiratory diseases that have the potential to be fatal.
The COVID-19 is the most recently discovered coronavirus that originated in Wuhan, China.
Its symptoms include coughing, fever, and shortness of breath.
Since its discovery in December 2019, it has spread to over 100 countries and infected over 100,000,000 people, killing over 2,000,000 in the process.
Because of how infectious and deadly the virus is, governments around the world have put extreme measures in place to prevent its spread.
Pandemics like COVID-19 cause uncertainty. It gets people to think about their finances and to protect their families with life insurance.
Life insurance companies are also scrambling to get ahead of the disease so they know how to treat potential applicants.
How The Coronavirus Affects Existing Life Insurance Policies
If you already own a life insurance policy and you pay the premiums, there is no need to worry. Your coverage is guaranteed from the outset. That means the insurance company can’t deny a claim unless the cause of death was specifically excluded.
The most common exclusion is for suicide in the 2 years after you get the policy.
What about a pandemic? Is that excluded by the insurance companies?
Currently, there are no exclusions for pandemics. Whether that changes in the future is still to be determined. If the insurance companies and reinsurers decide that the risk of catastrophic losses are too high, it can put in the exclusion for new policies in the future.
No exclusion? No worry.
If you contracted COVID-19 or any other type of respiratory virus and died, your beneficiaries will still get the death benefit.
You can even travel to a country against the advice of the government, get COVID-19 and pass away. Your claim won’t be declined.
Besides paying the death benefit, there are also other guarantees in your policy.
For example, the insurance company can’t increase the premium or cancel your policy for any reason.
Speaking of premium, some companies are offering to defer premium payments by 90 days without interest if any of these apply to you:
- You need to self-quarantine for a 14-day period after returning from a trip outside of Canada or you have been in contact with someone confirmed or suspected of COVID-19
- You have lost your job or have been temporarily laid off
- You need to take time off work to care for a child or family member with COVID-19
While the support and guarantees are great for existing policy owners, new applicants don’t share the same benefits.
Applying For Life Insurance During The Coronavirus Pandemic
The coronavirus has the biggest impact on current life insurance applicants.
While the insurance company won’t charge you more if you’ve recovered fully from COVID-19, the same can’t be said if you currently have the disease.
The process of getting life insurance starts with the application, so let’s look at that first.
Application
Non-face-to-face applications were already here even before the pandemic. You can go through the entire application without meeting the advisor so that you can maintain proper social distancing.
On the application form, you’re asked if you traveled outside the country within the past 12 months or if you plan to do so within the next 12 months.
Because of COVID-19, there’s now an increased focus on foreign travel. That means you’ll need to disclose the countries visited, particular regions within the countries, and length of time spent abroad.
If you just returned from a country that’s been impacted by COVID-19 or plan to travel to one soon, the insurance company is going to postpone any decision until more time has passed or you return from your future trip.
You’re also asked about your most recent visit to your healthcare provider.
For example, you just returned home from a trip and saw your doctor for symptoms related to the coronavirus. The insurance company will definitely want to know all the details.
It will want to know the reason for the visit, any diagnostic tests and the results of these tests.
You want to be completely truthful about your travels and doctor’s visits. That’s because the insurance company can decline a claim in the first 2 years of coverage for material misrepresentation.
After 2 years, it has to prove that you acted fraudulently to deny your claim.
Underwriting
The novel coronavirus still has many unknowns, like the mortality rate, whether existing antiviral drugs can help people recover, and much more.
Underwriters don’t like unknowns. They’d much rather deal with risks that have been studied extensively and have a long history.
Because of that, if you have COVID-19, you’re going to have to wait until you fully recover before you can buy life insurance. Applying any time before the waiting period ends will result in a postponement.
For a non-hospitalized diagnosis, that means waiting 30 days after the date of diagnosis before you can apply.
For a hospitalized diagnosis, it increases to 3 months if you’ve fully recovered.
If you have residual effects 3 months after hospitalization, the underwriter will look at your case very carefully. The best-case scenario is that you have minor residuals and regain full functional capacity. The worst-case scenario is if you had a severe case of COVID-19 which could result in a longer postponement period or an outright decline.
Here are some other factors that may affect the underwriting outcome:
- Was the diagnosis of COVID-19 confirmed?
- Is there a recent history of suspected COVID-19 diagnosis or exposure to the virus?
- What symptoms, if any, have you experienced and have you fully recovered?
- Were you hospitalized?
- What is your travel history or planned travel? Frequent travel to areas where COVID-19 is more prevalent may increase the risk of exposure.
If you want to skip all of those underwriting steps, you can buy a simplify issued or guaranteed issue policy.
These types of life insurance are more expensive but they ask fewer questions and you can skip the medical exam.
If you’re looking for instant coverage and an application that doesn’t ask about the coronavirus, these are the types of policies to buy.
Keep in mind that if you have a guaranteed issue policy and you pass away from an illness within the first 2 years, your beneficiaries will only get the premium that you paid refunded to them.
Medical exam
Speaking of the medical exam, it’s still a requirement for many cases where you are either older or applying for a large amount of coverage (or both).
Typically, a medical professional does the test at your home or workplace, collecting blood and urine samples as well as measuring your blood pressure and height/weight.
During the pandemic, most medical providers are suspending in-person, on-site services like the above.
Without the medical exam, the underwriters are going to be missing a big piece of the puzzle when assessing your risk.
The insurance companies and paramedical providers continue discussions to see what workarounds are available to collect this vital data.
In the meantime, one insurer came up with a solution. If a medical exam is required, it will forgo it for now. Instead, it will charge a higher premium. Once the pandemic is over and business is back to normal, you can do the medical exam. If you ace the medical exam and end up with a lower rate, you can get the overcharged premium refunded.
Others have temporarily increased the amount of death benefit needed for mandatory medical exams to over $1,000,000, up to a certain age (usually 45 or 50). That means if you’re under 50 and applying for $1,000,000 or less, you can bypass the medical exam portion of underwriting.
While we make every effort to keep our site updated, please be aware that timely information on this page, such as quote estimates, or pertinent details about companies, may only be accurate as of its last edit day. Brian So Insurance and its representatives do not give legal or tax advice. Please consult your own legal or tax adviser. This post is a brief summary for indicative purposes only. It does not include all terms, conditions, limitations, exclusions, and other provisions of the policies described, some of which may be material to the policy selection. Please refer to the actual policy documents for complete details which can be provided upon request. In case of any discrepancy, the language in the actual policy documents will prevail. A.M. Best financial strength ratings displayed are not a warranty of a company’s financial strength and ability to meet its obligations to policyholders.
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Well written
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