Apr 4, 2020

How Does COVID-19 Impact Life Insurance Policies?

COVID-19, also known as the coronavirus, has impacted nearly every aspect of our lives, but does that also include life insurance? Every life insurance policy is different, but here are the answers to the most common questions:

Q: Will a life insurance policy cover a death caused by COVID19 or any other pandemic?
A: Most policies in place today are valid and will be honored. The only exception to this statement is if you were not honest when answering application questions about preexisting conditions and travel plans.

Q: What happens if I can’t afford to pay the premiums?
A: Your life insurance policy is only valid if the premiums are paid and up-to-date. However, you should contact your specific insurance agent or provider to discuss this issue, since some of them may be willing to work with their customers during this stressful time of unpredictable income.

Q: Will life insurance premiums go up due to COVID-19?
A: Generally, life insurance premiums will not increase due to this pandemic alone. However, if you contract this or any other illness, then premiums could increase or make you illegible for coverage.

Q: How does COVID-19 impact the 2-year contestability period?
A: A 2-year contestability clause is a standard contract feature in the life insurance industry. The purpose of this clause is to protect the insurance provider from fraud and false information on an application within the first two years of coverage.

The contestability clause only applies during the first two years of coverage so if you have had your policy for longer than this time period, there is no need to worry. For people who have had their policy for less than two years, it is important to know that insurance companies do pay claims during this time period, but these claims will be subject to a higher level of scrutiny. As long as you were honest when completing your application, the insurance company should honor the claim.

Q: How is COVID-19 impacting new applications for life insurance?
A: There are too many uncertainties to give a definitive answer to this question, but this is what we do know:

• Some insurance companies may temporarily suspend accepting new applications and it is expected that they will soon add new restrictions so the best time to purchase coverage is now.
• Life insurance companies will request medical record from your doctor, and responding to these requests are not the staff’s priority at this time. The earlier you complete the application, the sooner it will be reviewed once the records are received.
• Most insurance companies still require a medical exam. If you don’t want to risk exposure to COVID-19 through this exam process, there are more expensive, short term, no-exam policy options that you can purchase now to provide coverage until you can purchase a lower-cost, longer-term, exam-required policy later.
• There will be new questions regarding international travel. Insurance companies have always asked about travel and have postponed an application if someone is traveling to a country designated a Level 4, which means “do not travel.” Right now the entire world is designated a Level 4, so if you do plan to travel to any other country in the near future your application will be delayed.
• Questions about COVID-19 are now part of the application process for many life insurance companies. At least one insurance carrier has stated that anyone who has been diagnosed with this illness will have their application postponed for at least 30 days and it will be reconsidered after the person can prove that their health is back to their normal baseline. Some other are now asking if applications have been exposed to the virus, and if so, the applications are again delayed for 30 days and proof must be provided that there is no infection.

Today there are many uncertainties about life insurance coverage, options and payments, but we can help. At Alliance, we work with the best insurance carriers in the state and can help you navigate the application process. We may not have all of the answers, but we will do our best to find them. Please call us at (866) 771-4715 to speak with one of our insurance specialists or request a free online quote.

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