The Impact of COVID on Life Insurance
If someone you know died from COVID-19 and had an existing life insurance policy, there should be no problem receiving the death benefit. The terms of a life insurance contract cannot be changed after purchase, so anyone with a policy before the pandemic will continue to be covered as long as premiums are paid.
However, the life insurance industry is in a quandary right now when it comes to new applicants applying for policies.
Some insurers have placed an age limit on applicants to whom they will sell policies. Travelers who have recently visited countries with a significant outbreak and people currently infected with the virus are generally asked to wait until after they have quarantined or recovered to apply for life insurance. While the coronavirus has had a high fatality rate among people age 65 and older, the death rate has fluctuated among demographics over the past year as the virus spread from metropolitan areas to more rural parts of the country.
With this in mind, now is probably one of the most challenging times to apply for a life insurance policy. In the past, applicants have had to answer standard questions regarding their medical history. Today, most also will have to disclose if they have been treated for COVID-19. Bear in mind that even people who did not become severely ill could suffer medical conditions in the future resulting from the infection. However, it is best to answer that question honestly, because any future claims could be denied if it is found the applicant lied about his or her COVID experience on the application.
As the data continues to be assessed, it is likely that insurers will adjust their terms and rates in response to the recent pandemic. It is possible, in fact quite probable, that data pointing to enduring effects of COVID-19 will be included in life insurance underwriting standards in the future. This could increase premiums for COVID-19 survivors – or result in denial of coverage altogether.
In the past, there were life insurers that sold low-cost, low-payout policies without a medical exam or extensive health questions. But these days, given how quickly the coronavirus can take a life, applicants age 60 and older would be hard pressed to qualify for one of those “guaranteed issue” policies.
In fact, pre-existing health conditions such as diabetes and asthma – which are highly susceptible to the ravages of the coronavirus – may undergo more scrutiny in the future. While pre-existing conditions are no longer a qualifying issue for health insurance, they are very much a part of the life insurance underwriting process and do increase individual premiums.
There is one silver lining for life insurance applicants: Some insurers have eliminated the normally required physical exam due to social distancing restrictions. Others have opted to postpone the in-person exam but offer immediate temporary coverage with a limited death benefit. A couple of life insurers in Connecticut and Massachusetts even offer a free, three-year term life policy to frontline workers in appreciation for their work during the pandemic. Eligible applicants include in-hospital personnel and first responders who have the greatest risk of exposure to the coronavirus. Anyone who has lost their income due to the pandemic and is in danger of not being able to pay life insurance premiums should call their carrier to see if there are options to continue coverage. Some companies have agreed to defer premiums for up to 90 days rather than cancel coverage for people likely to find employment soon. It’s a good idea to call and find out rather than miss payments and hope your insurance company chooses not to notice.