Does life insurance cover pandemics like coronavirus?

The coronavirus has changed many things about our daily lives.  While we are sheltering-in-place in our home in California, my wife and I have taken this time to conduct a financial audit. We have made strides toward adapting our own financial plan to account for this historic event and unexpected developments that could occur at some point in the future. 

Primarily, this includes using the newfound time to step back from the hustle and bustle of everyday life and reflect on our financial picture and plans, in particular thinking about our estate. 

In particular, financial planning is the process of aligning your actions to meet your life goals through the proper management of your financial decision-making. Financial planning encompasses numerous areas with elements of financial protection, building wealth, contingency planning, saving for emergencies and planning for milestones both near and far. 

To ensure all of this remains on track and you’re not taking on undue financial risk, life insurance should serve as a core pillar protecting your family.  However, one might wonder whether a life insurance policy would cover death resulting from a pandemic like COVID-19.  In short, you want to make sure your death won’t be excluded as some sort of ineligible event, leaving your beneficiaries financially stranded.

Fortunately, I was able to learn this and more from some senior employees at two of the best online life insurance companies.  They are Phil Murphy vice president of insurance at Ethos and Laura McKiernan Boylan, head of underwriting solutions at Haven Life. 

In short, a life insurance policy from both of these companies covers death from COVID-19, though exceptions do apply.  However, for those who have more questions they’d like answered about life insurance policies before moving forward with a quote, consider the following FAQ to provide more clarity on how coronavirus (or some other health pandemic) would affect your life insurance policy. 

Does term life insurance cover against death caused by COVID-19?

Certainly a valid concern for anyone carrying life insurance coverage, both company representatives indicate COVID-19 is not an excludable death event.  Specifically, Murphy of Ethos cites, “COVID-19 is not an exclusion with our term life insurance policies.”  Boylan of Haven Life echoes this position saying, “term life insurance policies sold by Haven Life, which are issued by MassMutual, cover death from COVID-19.”

Do exceptions exist to this term life insurance coverage when the cause of death is COVID-19?

Both companies cite similar exceptions and both relate to the timing of when each company’s policy issuers underwrite a policy.  Specifically, Murphy highlights policies being reviewed for new applicants at Ethos who test positive for COVID-19 or are experiencing COVID-19-like symptoms, “will be postponed for coverage until symptoms clear or the individual tests negative for the virus.” Further, “those applicants who are negative for the virus and without symptoms are able to apply for coverage as usual and should they contract the virus at some future date, the customer is covered.”

Boylan of Haven Life says, “as long as a customer is honest when completing their application, there are no exclusions related to a death from COVID-19 or pandemics overall.”  However, Haven Life also notes the decision of postponing pending applications from individuals suffering from COVID-19. “Decisions on applications will be postponed if an applicant is currently ill with COVID-19.”  

If an insurance applicant becomes exposed to the virus before or during the issuer’s underwriting process, the policy will not result in a payout. Haven Life chooses to pause the underwriting process in this event.  “There is also a waiting period after exposure or recovery. If an applicant did not disclose COVID-19 on the application and later died as a result, the claim may not be paid,” says Boylan.

How do you file a claim against your life insurance policy in the event of death?

If the policyholder passes away, the beneficiary must take action to file a claim.  According to Murphy, “when an insured person dies, it’s the responsibility of the beneficiary named on the policy to contact the insurance company to file a death claim. The insurance company will help the beneficiary with the claim process.”

At Haven Life, the beneficiary should contact the company’s customer success team with the requisite information needed to initiate a claim. Boylan says, “the life insurance beneficiary can contact Haven Life’s customer success team to file a claim to receive the policy payout (called a death benefit). In order to submit a claim for the policy, a beneficiary will need to provide a government-issued death certificate as well as date of birth and social security number.”

At Ethos, you may have a choice of policy payout.  Depending on your policy, you may have the option of receiving your life insurance policy proceeds either as a lump sum or have it spread out over time.  To know whether you qualify for this option, you will need to refer to your specific insurance policy for details regarding all possible settlement options available to beneficiaries at the time of claim processing.

In most cases, the beneficiary will need to contact the policyholder’s life insurance provider to initiate a claim and provide the necessary documentation to support the claim. The standard process involves: 

  • Step 1: Contacting your insurance agent (or insurer directly), who will be able to guide you through the whole process
  • Step 2: Obtain an official copy of the death certificate and also a certified copy from the funeral director (or other official authority)
  • Step 3: Contact your insurance company to initiate a claim on the policy
  • Step 4: Submit the death certificate to the insurance company to substantiate the claim and proof of death.

Upon satisfactory proof, the insurance company will provide the death benefit to the beneficiary.

Related: What is the Cash Surrender Value for Life Insurance?

Do life insurance carriers offer a life insurance premium grace period in light of the current economic climate?  If so, what are the terms?

While circumstances vary company by company, these two insurers have available premium grace periods to anticipate financial exigency in the current economic climate.  Because these policies represent a fixture in a person’s financial plan, neither company aims to have policies lapse on account of financial hardship tied to COVID-19.

Per Murphy, Ethos has extended its payment grace period to 31-90 days but notes, “some states [have also set] their own regulations around grace periods [for life insurance policies].” 

Haven Life also offers a grace period for policyholders dealing with economic fallout related to COVID-19.  Boylan says customers should reach out to their customer service team for accommodations.

In usual circumstances, failure to pay for any type of insurance premium results in a loss of coverage in quick order.  As we do not find ourselves in usual times, many companies have been proactive in establishing grace periods for payment.  While this buys you more time before making your next premium payment, this often does not represent the forgiveness for paying the premium nor a refund on your policy payments.

Other types of insurance have announced their policyholders will receive a refund on their policy due to a lack of need during the health pandemic.  Auto insurance companies have announced a collective $6.5 billion refund (the amount varies by state and insurer) to customers during the months of March and April on account of policyholders driving dramatically less while remaining indoors.

In situations where a person misses a payment normally, having your policy reinstated can be tricky or even result in higher premiums on account of your prior inability to pay.  While plans vary by insurer and state, it appears numerous insurers have developed extensive plans for forgiveness.

Finally, just because your state mandates insurance grace periods, you should still contact your insurer directly to see the terms offered to you.  You might find the state minimums are less generous than what your insurer offers to all of its policyholders.  Also, it will notify your insurer of your situation and alert them to your current inability to pay – hopefully indicating your policy should not be automatically cancelled or sent forward to the non-payment process.

Are there any special considerations or processes one should anticipate when shopping for life insurance during COVID-19?

Thankfully, many life insurance companies have begun offering insurance online and do not require a medical exam to underwrite the policy.  Companies like Bestow Life Insurance cater exclusively to this market by solely offering life insurance policies without the need for an exam.

Haven Life and Ethos also offer these no exam policies, though in some circumstances, it may be a requirement to underwrite the policy.  Because of this possibility, you might wonder if COVID-19 has created any special circumstances or processes when shopping for life insurance.

Individuals can still apply online for term life insurance. Boylan says if approved for a Haven Life policy, “coverage can start immediately, and medical exams are not needed in some cases.”  Further, she notes that the policy is based on the honesty of the policy applicant. “It’s important to note that issuing the policy or payment of benefits is always based on the truthfulness of an applicant’s answers.”

Also, due to the availability of these no exam policies, demand has picked up significantly for these types of life insurance.  As a result, Boylan notes, “digital life insurance agencies are seeing an increased volume of applications right now.  [As a result,] the time for a final decision on eligibility and rate may take longer than usual.”

In other words, should you wish to purchase a life insurance policy through an agency like Ethos or Haven Life, expect the time from application to approval to take longer than it might during normal circumstances.

Has COVID made it harder or more expensive to get a new life insurance policy?

Understandably, you might think that the cost of purchasing a term life insurance policy might have increased given the health pandemic’s effect on mortality. Life insurance companies would want to guard against adverse selection by covering higher-risk individuals like front-line health workers.  However, when the entire population has heightened exposure risks from daily interactions, it might result in a higher population mortality risk and thus higher premiums to account for any uptick in mortality rates.

For the time being, Boylan says rates haven’t changed at Haven Life and you can still apply for insurance.  “You can still apply for term life insurance and, if approved, get coverage started immediately. Pricing for policies sold by Haven Life has remained the same, so you can still purchase affordable term life insurance during the crisis.” 

Citing a potential customer seeking term life insurance coverage, Boylan notes, “a healthy 35-year-old woman can purchase a 20-year, $500,000 policy through Haven Life for about $20 per month.”  Getting a medical exam would be best for the underwriter to get comfortable with your insurability risk and to secure the most competitive rates for a term life insurance policy. To account for the presence of COVID-19, insurers will likely add questions for their underwriting process about recent medical testing or treatment.

As stated above, Boylan reiterates, “for some applicants, this could result in temporary postponements of the application where the life insurance company will need to provide a decision on eligibility 30 to 90 days later.”  It appears as though insurers are proceeding cautiously despite the large uptick in interest for term life insurance coverage.

How Has the Coronavirus Impacted Life Insurance?

Life insurance acts as protection for your financial needs as you age, get married, start a family, buy a home and save for retirement.  As you progress through life, life insurance underpins your financial plan because you want to keep your finances secure and you desire to transfer the risk of your death to another party.  In the case of term life insurance, to the insurer in exchange for consistently paid premiums over the life of the policy.

Financial planning requires creating an action listing for potential events you can encounter in the future while still remaining on track to accomplish your goals. Financial planning can accomplish many goals, among them: 

  • Starting to invest money and building your savings
  • Instilling confidence in how to operate in episodes of uncertainty
  • Providing peace of mind
  • Building cash flows and resources for living comfortably
  • Reaching your goals

With the introduction of COVID-19, more risk has entered our lives. This calls for better planning if we wish to assess our financial exposure to loss of life and by extension, considering the best investments for your beneficiaries.  Considering a life insurance policy now makes sense should you wish to assess your financial needs for now and in the future.

Additionally, it calls for having a will in place should you also need to establish an estate plan for your affairs after you’re gone.  Companies like Haven Life or Fabric Life Insurance offer will services in addition to their term life insurance policies.  Consider combining these resources to plan your affairs and prepare for an increasingly different world.

If you are interested in learning more about some of the best online life insurance companies to get a quote for a policy, consider the companies reviewed on this site below:

*Must purchase Fabric Instant (accidental death) first, then can purchase Fabric Premium.

Prices, products offered and coverage terms effective as of publication.

This article originally appeared on YoungAndTheInvested.com and was syndicated by MediaFeed.org.