You won’t find March Madness updates or the Coachella lineup on the news today — just a steady stream of information about the newest global pandemic, COVID-19.
It seems our entire nation has paused with baited breath in the middle of this coronavirus pandemic.
Which creates plenty of time to think about life insurance — if you haven’t already purchased a policy.
Table of Contents:
- Getting Life Insurance During a Pandemic
- Do Life Insurance companies Consider Pandemics?
- What To Expect If You Are Diagnosed
- What Happens to Your Premiums During Pandemics?
- What If You JUST Applied for Life Insurance?
- How Do You Apply During A Pandemic?
- Should You Get Life Insurance During a Pandemic?
Getting Life Insurance During a Pandemic
Life insurance offers protection for your assets and it creates a financial lifeline, so to speak, for your family or any other dependents you may leave behind.
Pandemics spike panic. Let’s be honest, it’s nearly impossible to find toilet paper or hand sanitizer right now.
Thankfully, buying life insurance is not as difficult as finding toilet paper. The process is more complex, of course, but there’s no shortage of inventory for quality life insurance products.
If you already have life insurance, you’ve already taken steps to protect your assets for your family in the midst of this pandemic, and you can breathe a sigh of relief — at least about that.
What is a Pandemic?
The World Health Organization declares a pandemic when a new disease that people do not have immunity for spreads globally.
Our world has seen many pandemics in the past: The Black Plague, Smallpox, Yellow
Fever, and most recently, the 1918 Spanish Influenza.
All these diseases caused considerable loss of life and irrevocably altered everyday routines.
During this precarious time, think about how you would offer financial protection for your family in case the worst happened. For many people, life insurance provides an efficient and affordable way to provide this protection.
Do Life Insurance Companies Consider Pandemics?
It’s logical to assume a pandemic would affect life insurance applications and premiums. After all, life insurance companies consider your health status during the application process.
But if you currently have life insurance, your existing policy will cover you. If you died in the midst of this pandemic, your survivors could still claim your death benefit.
But if you are applying or have recently applied for life insurance, the novel coronavirus pandemic could impact your application and your premiums.
Life insurance companies use this rule of thumb: If your risk of mortality increases, insurers will either refuse to cover you or insure you but at a higher premium.
Life insurance companies essentially play a game of risk, using data to gauge the risk of your application. Pandemics, by their nature, create riskier applications.
What to Expect if You Are Diagnosed?
Again, if you already have a life insurance policy, your coverage applies no matter what happens with the pandemic.
Perhaps you just traveled to Wuhan or to a European country. Maybe you came into direct contact with an infected neighbor. It doesn’t matter. If you have a policy locked in place, you are still covered, regardless of your most recent activities.
Just as importantly: Your life insurance company cannot change or increase your premiums based on your recent traveling or even a diagnosis of COVID-19. Your insurer can’t change your premiums or your health classification.
Yes, life insurance companies do have some exclusions which can prevent payout. Common exclusions include dying from high-risk activities, such as skydiving or deep sea diving, or acts of war.
You should have been made aware of all exclusions during your application process. If not, go back and read your policy again so you’ll know exactly where you stand.
Life insurance companies do not have pandemic exclusions. If you have coverage in force, a death from coronavirus will not affect your beneficiary’s ability to claim your death benefit.
What Happens to Your Premiums During Pandemics?
Life Insurance companies rate your health, including all previous and current medical
diagnoses, to determine your premium rates. The more risk your policy presents when you apply, the higher your premiums will be.
Having just a cold or even the flu will not increase your premiums; however, any complications due to the flu may have consequences.
Let’s imagine together for a second. Let’s say you have a life insurance policy, contract the coronavirus, and recover but have long-term ramifications due to the virus.
There is a chance your health rating on future life insurance applications may change. Future policies could require a higher premium.
But once again, this change in your health would not impact your existing coverage. This is one of the main reasons getting coverage earlier can save a lot of money later in life.
What If You JUST Applied for Life Insurance?
Now, what would happen if you just applied for life insurance during a pandemic?
If you recently applied for a policy and lied about either having the virus or traveling in a “hot zone” region, you have cause for concern.
Life insurance companies have what is called a contestability period. During this time frame — usually two years — the company can double back and check for any fraudulent information in your application.
If you weren’t entirely upfront on your application and then you contracted the virus and subsequently died, your life insurance company can refuse to pay your death benefit, leaving your loved ones without your life insurance protection during this apprehensive time.
Companies will check during the contestability period, and if they suspected dishonesty in the data you provided, they can open an investigation at any point — even five to 10 years from now. If they establish you provided false information, they can refuse to pay your death benefit.
So it’s essential to be honest during the underwriting period no matter what. Be truthful about your travel — both previous and upcoming trips. If you were sick with the virus or have any other possible problematic habits such as smoking, just be honest with the company.
It is better to pay a higher premium now than to leave your family without your policy’s financial protection because of fraudulent answers.
How Do You Apply During a Pandemic?
There is still a lot we don’t know about this historic coronavirus. We can draw some data from current statistics, but we still do not know what long-term effects this virus will have.
These unknowns create more risk for life insurance companies. Keeping that in mind, be
prepared for any new and future life insurance applications to be affected.
We’ve noticed some companies following governmental trends, flagging and delaying certain applications if:
- You have any recent or future plans to travel to China.
- You have recently returned from the Wuhan province of China.
- You have traveled recently or are planning to travel to other highly affected areas such as China, Japan, Vietnam, Italy, Iran, and South Korea.
Insurers haven’t altered their processes significantly. While they may be updating their health and lifestyle questions, companies are not refusing applicants during this pandemic.
Should You Get Life Insurance During a Pandemic?
The short answer, YES. Life insurance at any point in your life is an important asset. Coverage offers financial protection for your assets and loved ones.
During this tenuous time, having life insurance may offer some assurance that, no matter the outcome, your loved ones will be financially covered.