Securing Life Insurance During The Covid-19 Pandemic

Securing Life Insurance During The Covid-19 Pandemic

Securing Life Insurance During The Covid-19 Pandemic
Reading Time: 8 mins

Even when the Covid-19 pandemic ends, its effects on the life insurance industry could linger for years. For starters, the way we purchase life insurance may never be the same again. Insurance companies found themselves in the centre of the pandemic storm, which necessitated the need to alter how their policies are issued and underwritten. 

So far, insurance providers have weathered the crisis exceptionally well. However, the pandemic has exposed various vulnerabilities and gaps among policyholders. Following its ravaging effects, most of us couldn’t help but assess the relevance of life insurance in these uncertain times. Many people are now looking into what steps they should take to ensure the stability of their families and loved ones while also weighing how the Covid-19 pandemic may impact their existing life insurance policy. 

Even as the Covid vaccine rollout gains traction, the need to understand how to get life insurance during the Covid-19 pandemic remains a fundamental talking point. 

Does Life Insurance Cover Covid-Related Deaths?

Yes. Life insurance covers Covid-19-related deaths. Provided you carry an active life insurance policy that is in good standing, your beneficiary or beneficiaries will receive your death benefit payout, should you succumb to coronavirus-related complications. Better yet, your insurance provider cannot alter your health classification or premiums. This applies even if you have Covid-19 or have a higher risk of exposure because of your job or recent travel to a pandemic hotspot. 

Claims on social media that life insurance carriers won’t pay off a policy if the policyholder has received a Covid-19 vaccine are false. Life insurance carriers don’t take into account whether or not an insured has received a Covid vaccine when making the decision to pay a claim. Further, Covid-19 vaccinations have not changed the claims-paying process. 

Impact of Covid-19 on Life Insurance

The Covid-19 pandemic has certainly caused a paradigm shift in the life insurance industry. While the pandemic won’t impact life insurance policies that are already in force, and benefits are paid for Covid-19-related deaths, a few intricacies of life insurance have certainly taken a new shape. Here are some impacts of Covid-19 on life insurance. 

Life Insurance Premiums

Following the increased medical risks faced by those who have contracted Covid-19, the long-term side effects, and the rise in the mortality rate of policyholders among other factors, different life insurance carriers have increased the premium costs of their term and life insurance policies. If you were to develop long-term, Covid-19-related health problems before obtaining life insurance coverage, you’d end up in a lower health class and with a more expensive policy. 

There’s no specific model attributed to the rise in premiums, since there is little data to support that people who have contracted coronavirus are at a greater risk of developing other health conditions. Even so, the direct deaths have increased the pricing of policies. Still, your premiums won’t be affected if you contract Covid-19 when your life insurance policy is already in force. 

If you’re looking to take out a new life insurance policy in these unprecedented times, start by reading the fine print about claims and benefits payouts. This will help you better understand what’s at stake with the policy, should you die or a family member contracts the virus. 

New Life Insurance Applications

Life insurance companies have recently overhauled their application questionnaires to establish and manage the risks an applicant possesses. Most of the newly introduced questions are to establish whether someone has:

  • Been advised to self-isolate
  • Had any coronavirus symptoms
  • Tested positive for Covid-19
  • Had direct contact with someone suspected to have, or who has tested positive for, Covid-19 

Insurance companies are also keen to look at the travel histories of new applicants. Your application may be denied or postponed if your travel history shows that you’ve been to a coronavirus pandemic hotspot. 

Life Insurance Medical Exams

New or first-time applicants for life insurance now have to cope with new application rules and processes. The Covid-19 pandemic has sped the adoption of accelerated insurance underwriting as a preference over medical exams.

Accelerated underwriting eliminates the need for a physical medical exam and evaluates your application based on a prescription history check and data from third-party sources. With the need to minimize physical contact, insurance applications are now relying more than ever on digital records and less frequently send a medical examiner to your location.

What Can Affect Your New Life Insurance Application?

Sure, you can get a new life insurance policy during the Covid-19 pandemic, but things may differ from what has long been the norm. Here are some aspects that may affect your life insurance application.

Contracting Covid-19

Contracting Covid-19 will affect any new life insurance application. While you’re not locked out of applying for coverage, you shouldn’t be surprised if an insurance company postpones any decisions on your application for 30 days or more, until you’ve made a full recovery. If you’ve recently come into close contact with someone suspected to have or who has contracted Covid-19, the insurance company may ask you to suspend your application until you have a clean bill of health, or mandate that you provide a statement of good health. 

Make sure you’re 100 percent honest on your insurance application; otherwise, your beneficiaries may not receive your death benefit, which is the whole point of carrying life insurance. 

Age- and Health-Related Complications

Your application for a new life insurance policy may encounter some stumbling blocks if you’re older or are living with some health-related complications. Some insurance providers consider age as a risk factor for Covid-19. For instance, early in the pandemic, some insurers restricted the sale of new life insurance policies for older adults. Policy applications for people above a certain age bracket were also suspended or delayed. Luckily, as we continue to gain more information and data about what constitutes a higher Covid-19 risk, some insurance companies are slowly easing the age restrictions for applicants.  

Insurers are also keen on any health-related complications that may increase your risk of succumbing to Covid-19. Although this may change an insurer’s approach to its policy offerings, providers will continue evaluating the situation as more data about health-related complications emerges and as the vaccine rollout progresses. 

Travel Restrictions and Quarantine

For a long time, questions about an applicant’s international travel history have been standard in life insurance to assess safety risks. Although the focus was on risky regions and those that may have limited access to healthcare, insurance providers are now looking at international travel itself as a health risk.  

Your insurer may postpone your application if you either have planned upcoming international travel or have recently completed international travel, since these may be a high-risk indicator for coronavirus exposure. In addition, your application may be delayed or postponed if a member of your household has returned from a country with a large coronavirus outbreak. Remember, companies have different guidelines on how long you should wait to apply for life insurance after a voyage.

Even if you return and go into quarantine, your insurer may impose a waiting period before considering your application. This is to ensure you have recovered fully, or confirmed that you didn’t contract the illness while abroad. 

Such delays and extra scrutiny may be inconvenient, but you should be honest when filling out your insurance application, including information about your health history, travel history, and self-isolation measures. Lying on your insurance application may invalidate your coverage, even if you’re approved for a policy. 

Steps Taken by Life Insurance Companies in Response to Covid-19

When the coronavirus pandemic struck, insurance companies immediately had to switch to remote operations. At the same time, they were receiving calls about switching coverage, answering questions about active policies, and paying out claims for life and health insurance. For insurers, landing on the wrong foot wasn’t an option, and so far, they’ve survived the crisis well, thanks to robust action. 

Here are some of the steps taken by life insurance companies in response to Covid-19. 

Continuous Underwriting

The move toward continuous underwriting, which has been made possible by increased device and data connectivity, has presented an opportunity for insurance personalization. Before the pandemic, underwriting suffered from two main data gaps. It was constrained to a single moment and didn’t account for changes in lifestyle. 

Insurance companies have automated the underwriting process to reduce inconsistencies and improve efficiency gains. Some have adopted accelerated underwriting, which allows for the digital submission of documents. This near auto-issuance of policies reduces the need for invasive fluid and paramedical exams. Companies have also continued to underwrite policies with dynamic adjustments based on customers’ behaviours and personalized actions. This evolution has flipped the underwriting approach on its head, with health, lifestyle and medical data being part of the entire picture. 

Enabled Online Payments of Premiums and Claims

Through partnerships with digital banks or financial technology companies (fintechs), insurance companies have transitioned to online claims and premium payments. Through this innovation, customers can enjoy expedited claims payment processing and premium rebates. 

Innovative Insurance Products

Many examples of innovation have taken centre stage in the insurance market in response to the Covid-19 pandemic. Some insurance companies have added a medical benefit for life insurance policyholders who are diagnosed with Covid-19 and extra coverage for funeral costs, should the policyholder succumb. 

Some insurers are now offering discounts by giving customers one month of free coverage, wherein you receive 13 months of coverage for the price of 12. Cash rebates, which are calculated as a percentage of the premiums you pay, are also available from insurers that have lower claims in certain business lines, such as auto insurance. 

Digitizing to Improve Data and Customer Relations

Traditionally, the customer relationship management systems (CRM) used by insurance companies have been less than ideal, due to duplication errors, missing contact information, and other errors. In response to the coronavirus pandemic, insurers pushed for digitization by adopting effective CRMs that could improve their customer records. With the pandemic forcing staff and insurance agents to work remotely, effective CRM systems can now seamlessly link to an insurance company’s channels for easier access to data.

What Can Make an Insurer Deny a Covid-19-Related Death Claim?

To date, insurance companies have provided life insurance coverage during the pandemic. However, Covid-19-related death claims may sometimes be denied, and for good reason. Here’s what can make an insurer deny a Covid-19-related death claim. 

Inaccurate or Incomplete Applications

An insurer may deny a Covid-19-related death claim if the policyholder had provided inaccurate, incomplete, or misleading information at the time of renewal or application. This may be the case if you lie about or fail to disclose significant health issues.  

Your insurer must discover the misstatement or misrepresentation within two years from the date of buying the policy, usually known as the “contestability period.” If you die within this period, an insurer can investigate the accuracy of the information you provided in the application. 

Defaulting on Insurance Premiums

You must pay your premiums on time to keep your coverage in force; otherwise, your policy lapses. If death occurs during such a time, the insurance company is within its rights to deny the death claim.

Type of Death Policy

An insurer may deny a Covid-19-related death due to the type of policy. For instance, a term life policy covers you for a specific period of time during, and your beneficiaries will receive a death benefit if you die. If you live beyond the coverage term and your policy ends, you will need to renew the coverage; otherwise, a claim made after this period will be denied. 

Conclusion and Recommendations

Life insurance has long been seen as a safety net against the unforeseen, but the uncertainty and unpredictability following the Covid-19 pandemic necessitated the need for life insurance coverage. Pandemic or not, life insurance is a great investment if you have people who depend on your income or finances, and who would suffer if you passed away. Luckily, insurers are not locking applicants out amid the pandemic, but you’ll probably go through an entirely different process, from application to underwriting and approval. 

With the new delta variant of Covid-19 creating more unknowns, taking out a life insurance policy should provide peace of mind in these unprecedented times. No one wants to talk about preparing for the unthinkable, but our ever-changing world necessitates it. 

Frequently Asked Questions

Should I be worried if I have a term life insurance policy?

There’s no need to worry. In fact, a term life insurance policy will provide coverage for the specified period, say 5 to 30 years, after which you can renew your policy. 

Will existing life insurance policies be affected by the Covid-19 pandemic?

The Covid-19 pandemic won’t affect life insurance policies that are already in force. However, new applications may be delayed or rejected in the wake of travel restrictions, age restrictions, and health complications. 

Does the Covid-19 vaccine affect my life insurance policy?

The short answer is no. The Covid-19 vaccine won’t affect your life insurance policy, since insurers don’t use your vaccination history when underwriting a policy. Further, insurers don’t consider whether or not you’ve received the Covid-19 vaccine when deciding whether to pay a death benefit.

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