Life Insurance And Covid-19: What's Covered?

The COVID-19 pandemic has led to a surge in life insurance applications, with people seeking financial security in uncertain times. While the virus has not changed existing life insurance policies, it is important to understand the potential impact on new applications and claims. During the peak of the pandemic, insurance firms in the UK paid out approximately £90 million in COVID-19 death claims, with an average payout of £63,000 to £137,000 depending on the policy. This article will explore how life insurance policies have been affected by the pandemic, the application process during COVID-19, and the potential challenges and misconceptions surrounding payouts.

Life insurance policies do pay out for COVID-19-related deaths

The average payout for term insurance was £63,000, while group policies paid out an average of £137,000. These policies provide financial support to families who have lost a loved one due to the virus. Roshani Hill, the ABI's head of protection and health, emphasised the importance of protecting oneself and one's family against unforeseen events, stating that "no amount of money can ever replace a life".

It is important to note that the misinformation spread online regarding life insurance and COVID-19 vaccines is false. Life insurance companies are not denying payouts for deaths related to COVID-19 vaccine complications. The American Council of Life Insurers (ACLI) has confirmed that insurance companies pay death benefits regardless of the cause of death, except in very specific and limited circumstances, and a COVID-19 vaccine is not one of those circumstances.

Accidental death and dismemberment policies (AD&D) do not cover deaths related to COVID-19

Accidental death and dismemberment policies (AD&D) are a type of insurance that pays a benefit upon the accidental death of the insured or the loss of a limb due to an accident. AD&D policies are designed to supplement regular life insurance policies and are not meant to be a substitute. Therefore, they have specific coverage limitations and only cover certain types of accidents.

AD&D policies do not cover deaths from natural causes or illnesses, including infectious diseases such as COVID-19. This is because COVID-19 is not considered an accident and falls outside the scope of coverage provided by AD&D policies.

AD&D policies typically cover events such as motor vehicle accidents, exposure to the elements, traffic accidents, homicide, falls, drowning, and accidents involving heavy equipment. They also cover the loss or loss of use of body parts or functions, such as limbs, speech, eyesight, and hearing.

It is important to carefully read the terms and exclusions of an AD&D policy before purchasing one. While AD&D policies can provide financial assistance in the event of an accidental death or dismemberment, they are limited in their coverage and should not be relied upon as the sole form of life insurance.

Some critical illness policies may not pay out for COVID-19-related deaths

The COVID-19 pandemic has brought about a greater awareness of the importance of having a health insurance cover. With the demand for quality medical care becoming prominent and the simultaneous rise in the cost of healthcare, it has become essential for everyone to be covered by a health insurance policy.

While active life insurance policies have not changed due to the COVID-19 pandemic, it is important to note that some critical illness policies may not pay out for COVID-19-related deaths. Critical illness policies provide a pre-decided lump-sum compensation to the insured, regardless of the hospitalisation cost. However, these policies typically cover only the conditions they specify, such as cancer. Therefore, unless a viral disease like COVID-19 is listed, the policy is unlikely to pay out. These policies are often supplemental to more traditional life insurance policies, which would pay out for a coronavirus-related death.

It is crucial to carefully review the terms and conditions of your critical illness policy to understand what illnesses are covered and whether COVID-19 is included. Additionally, failing to pay your life insurance premiums on time can also impact your claim. If your premiums are not current, the policy may lapse, and the insurer may deny your claim if the balance remains unpaid prior to the insured's death. Most companies have a grace period of 30 days and are required to send a notice reminding you of your outstanding balance.

During the pandemic, insurance firms in the UK paid out approximately £90 million in coronavirus death claims to grieving families, according to the Association of British Insurers (ABI). This equates to around £980,000 per day when the UK was facing the COVID-19 crisis at its peak. The majority of the claims, about 83%, have been paid to date, and every claim submitted so far has been accepted.

In the United States, the Federal Emergency Management Agency (FEMA) has also provided financial assistance for COVID-19-related funeral expenses. As of January 1, 2024, FEMA had approved more than 300,000 applications, shelling out $3.15 billion to cover funeral expenses for over 499,000 decedents. FEMA will continue to provide funeral assistance until September 30, 2025, to those who have lost loved ones due to the pandemic.

Life insurance companies are not refusing to pay out for deaths related to the COVID-19 vaccine

There is no evidence to support the claim that life insurance companies are refusing to pay out for deaths related to the COVID-19 vaccine. In fact, several sources indicate the opposite.

In March and May 2021, false social media posts claimed that life insurance companies were denying coverage and payouts to people who had received a COVID-19 vaccine. However, this information was quickly debunked by industry groups, state regulators, and individual insurance companies, who confirmed that vaccination status does not impact life insurance coverage or payouts.

The American Council of Life Insurers (ACLI) stated that "insurance companies pay death benefits on policies when the insured dies, regardless of the cause of death, except in very narrow and limited circumstances," and that a COVID-19 vaccine is not one of those circumstances. Similarly, the Canadian Life and Health Insurance Association stated that "receiving a COVID-19 vaccine will have no effect on the ability to obtain coverage or benefits from life insurance or supplementary health insurance."

Despite this, some people continue to spread misinformation and fearmonger about the COVID-19 vaccine's impact on life insurance. For example, a Facebook user claimed that their insurance company, Manulife, would not pay out their policy if they died from the COVID-19 vaccine because it was "experimental." However, Manulife responded to these claims on Twitter, stating that the COVID-19 vaccination "in no way negatively impacts your current insurance policies or valid Group Benefits coverage, nor does it factor into new insurance applications."

It is important to be skeptical of such posts that incite fear and to refer to official sources for accurate information.

Life insurance companies are busier than ever, with a 4% increase in applications in 2020

Life insurance companies have been busier than ever, with a 4% increase in applications in 2020. This was the highest year-over-year annual growth since MIB Group Inc. began tracking data in 2001. The pandemic has caused a surge in demand for life insurance policies, with many people seeking financial security and peace of mind in these uncertain times.

The increase in applications has resulted in longer wait times for some new life insurance applicants, particularly at the beginning of the pandemic, as insurers adjusted their medical underwriting processes. However, these issues have been largely resolved, and application times have improved.

Insurers have adapted to the new reality by introducing COVID-19-specific questions on their application forms. These questions aim to assess the risk level of each applicant and may include inquiries about recent travel history, exposure to the virus, and any symptoms experienced. Answering yes to these questions may result in a postponement of the application for a certain period, usually around 30 days.

Despite the increase in applications, life insurance companies have continued to provide coverage for COVID-19-related deaths. Active life insurance policies have not changed due to the pandemic, and beneficiaries will receive a payout if the insured dies from COVID-19, provided that the policy is in good standing and premiums are up to date.

During the peak of the pandemic, insurance firms in the UK paid out approximately £90 million in coronavirus death claims, with an average payout of between £63,000 and £137,000 depending on the policy. This equates to around £980,000 per day, with 7,000 life insurance claims received over a three-month period.

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