Life Insurance And Pandemics: What's Covered?

The COVID-19 pandemic has brought the question of insurance coverage to the forefront of many people's minds. Life insurance policies typically include exclusions, and your policy may not pay out if you die in a specific way, for example, suicide within two years. Pandemics, however, are not one of those exclusions. While insurance companies may delay finalising your policy to ensure you don't contract the illness, you can still get life insurance during a pandemic.

Pandemics are not excluded from life insurance policies

Life insurance applications screen for a host of medical issues such as heart disease, diabetes, and a history of cancer. The important thing to know is that your only job as an applicant is to answer the screening questions honestly at the time of the application. If you've never had any of the health issues the application asks for, you say so. But if you buy a policy in good faith, and during the application process answer honestly that you've never had a heart condition, and a year later, drop dead of a heart attack, the life insurance company is still responsible to pay.

The same rule applies to coronavirus. If you bought a policy at any point in the past, the life insurance company still has to pay out if you die from the coronavirus. The only way a life insurance policy wouldn't pay out for the coronavirus was if the policy specifically excluded paying for certain types of deaths. In this case, there would need to be a provision saying the policy won't pay for "pandemics", or something similar. But this is rarely, if ever, the case.

Encouragingly, health and life risks for pandemics resembling COVID-19 pose no fundamental insurability challenges due to the "non-systemic and modellable" nature of these risks.

Life insurance companies are financially strong and will be able to pay out

The Financial Strength of Life Insurance Companies

Life insurance companies are financially strong and stable, as evidenced by their high ratings from trusted agencies such as AM Best, Standard & Poor's, Fitch, and Moody's. These ratings indicate the companies' ability to pay future claims and their long-term financial stability. MassMutual, for example, has an exceptional financial strength rating of A++ from AM Best, while Guardian and Northwestern Mutual also boast superior ratings. This gives confidence to policyholders that these companies will be able to meet their financial obligations and pay out claims in the future.

Payout History of Life Insurance Companies

Life insurance companies have a history of paying out claims. MassMutual, for instance, is set to pay out a record-high dividend of almost $2.2 billion to its policyholders in 2024. Similarly, Guardian is set to pay out a record-high dividend of $1.4 billion in 2024. Northwestern Mutual, the largest life insurer in the country, will pay out $7.3 billion in dividends to qualifying policyholders in 2024. These figures demonstrate the financial strength and payout history of these companies, assuring policyholders that they will receive their benefits when needed.

Risk Mitigation and Diversification

Life insurance companies employ risk mitigation strategies and diversification techniques to manage their financial risks effectively. They underwrite policies based on careful assessment of risk factors, ensuring that they don't take on more risk than they can handle. Additionally, they diversify their portfolios by insuring a large number of policyholders across different regions, reducing the impact of localized events like pandemics. By spreading the risk, life insurance companies can maintain their financial stability and fulfill their obligations to policyholders.

Government Regulations and Consumer Protection

The life insurance industry is highly regulated, with strict guidelines in place to protect consumers. State insurance regulators and consumer protection laws ensure that life insurance companies operate ethically and responsibly. These regulations include requirements for reserve funds, investment guidelines, and consumer disclosure standards. As a result, policyholders can have confidence in the financial stability and integrity of the industry.

Life insurance companies are financially strong and well-equipped to pay out claims. Their high financial strength ratings, history of payouts, risk management strategies, and regulatory oversight all contribute to their ability to fulfill their obligations to policyholders. While pandemics pose significant challenges, life insurance companies have the resources and resilience to withstand these events and continue providing financial protection to their customers.

Life insurance companies are still accepting applications

Firstly, it is important to note that life insurance policies typically include a list of exclusions, and if the insured party dies by suicide, specified diseases, or while engaging in dangerous activities, the insurer is not obliged to pay out. Pandemics, however, are not listed as an exclusion, meaning that if the insured dies due to a pandemic, such as COVID-19, the insurer is required to pay out the claim, unless the policy specifically excludes pandemics.

While life insurance companies are still accepting applications, they are taking extra precautions due to the pandemic. For example, many companies are now offering "no exam" life insurance policies, which do not require a physical examination for qualification. This is particularly useful if someone is unable to leave their home due to pandemic-related restrictions or does not feel comfortable meeting with a nurse. Additionally, some companies are imposing travel restrictions on applicants, stating that they will not offer coverage if the applicant has travelled or plans to travel outside of their home country in the near future.

The underwriting process for life insurance has also adapted to the pandemic. While medical examinations are still taking place, they are now conducted with additional safety measures, such as the examiner wearing a mask and gloves. Furthermore, insurance carriers are asking applicants specific questions about COVID-19 symptoms and may delay finalizing a policy if the applicant has travelled to a high-risk area or displays any symptoms.

It is worth noting that the process of getting approved for life insurance may take longer during the pandemic, as some carriers are waiving conditional receipt, which provides temporary coverage during the approval process. Additionally, applicants may be required to sign a good health statement, confirming that their health has not changed between the time of application and the finalization of the policy.

Overall, while life insurance companies are still accepting applications, the process has become more intricate due to the COVID-19 pandemic. Applicants should be prepared for potential delays, additional safety measures, and more stringent health requirements.

Life insurance policies will still be valid if you die from the coronavirus

In the context of the COVID-19 pandemic, life insurance policies will cover deaths from the virus. However, it is important to note that critical illness policies typically do not cover viral infections like COVID-19. While COVID-19 is not considered a 'critical illness', if complications arise from the virus that meet the specified definitions in the policy, a claim may be presented. Additionally, if a critical illness policy has life insurance attached to it, and the insured dies as a result of COVID-19, the life insurance portion of the policy would pay out.

It is worth noting that the specific wording of the policy is crucial in determining coverage. Some policies may have express exclusions for pandemics and epidemics, or they may be included under the definition of a "chronic" disease, which is often excluded from coverage. Therefore, it is important to carefully review the terms and conditions of your life insurance policy to understand what is and is not covered.

Furthermore, the long-term effects of COVID-19 may impact your eligibility and rates for life insurance. Insurers use your current and past health records to determine eligibility and rates, so any long-term complications from COVID-19 can affect the cost and availability of coverage. If you are unable to qualify for a fully underwritten policy due to ongoing health issues, you may need to apply for a guaranteed issue life insurance policy, which does not require a medical exam but typically comes with higher rates and lower coverage amounts.

You can still get a life insurance policy during the pandemic

The COVID-19 pandemic has made many people more aware of their own mortality and the need to prepare for the future. If you are considering getting life insurance, it is important to know that you can still get a policy during the pandemic. Here are some things to keep in mind:

Life insurance exclusions

Life insurance typically comes with a list of exclusions, which means that the policy may not pay out if you die in certain ways. Common exclusions include suicide within the first two years of the policy, fraud, acts of war, dangerous pastimes, and criminal activity. However, pandemics, including COVID-19, are not usually listed as exclusions. This means that if you have an existing policy and you pass away due to COVID-19, your family should still receive the death benefit.

Applying for life insurance during the pandemic

If you are applying for life insurance during the pandemic, there are a few things to keep in mind. Firstly, you may be asked new questions related to COVID-19, such as whether you have been tested, treated, or exposed to the virus. Secondly, expect no-contact meetings and policy delivery. Financial advisors can offer advice via video calls or phone, and you can sign documents electronically. Thirdly, be prepared for possible delays if you have recently travelled internationally or plan to do so in the near future, as many insurance companies are implementing waiting periods for international travellers due to health advisories. Finally, there may be changes to the medical exam process, with some companies extending deadlines, accepting medical records instead of an exam, or waiving the exam altogether.

Choosing a reputable insurance company

When choosing a life insurance company, it is important to look for financial strength and stability. Check the company's history and reputation, and make sure they are financially strong enough to provide coverage for many years to come. You can find rankings of insurance companies based on their assets, net worth, and net income on the website of the Insurance Commission.

The importance of insurance during a pandemic

The pandemic has underscored the concept of preparedness and the need to have a ring of protection around yourself and your family. In addition to taking safety measures such as mask-wearing and physical distancing, it is crucial to also prepare financially. A protection and savings plan can help you plan your life goals without worrying about unexpected liabilities. During a pandemic, when jobs and incomes are uncertain and medical expenses are rising, having a steady income to help your family cope can be invaluable.

Frequently asked questions