Though not the most pleasant of thoughts, the ongoing COVID-19 situation has a lot of us thinking about mortality and how our death may affect those around us. For those of us who have dependents or relatives, their risk of financial burden due to our passing is of considerable concern. This realization is often the first step in obtaining life insurance as a safety net for our families.
A life insurance policy is a contract between an insurer and a policy-holder, where a designated beneficiary receives funds from the insurer upon the death of the insured. Life insurance is paid for by a one-time or recurring premium, usually by the policy-holder. These premiums are calculated based on several factors, including family and personal medical history, body mass index, and mortality tables, which show the expected lifespan of people of different ages.
When it comes to life insurance, although most people qualify for some level of coverage, pre-existing conditions can and do affect premiums, and in some cases can result in denial of coverage. With news coming out that some insurance companies are moving to exclude payouts for customers who die of coronavirus, many of us are left pondering: can I get life insurance after testing positive for COVID-19?
Those already covered by a life insurance policy can rest assured that a COVID-19 related death will be covered. Although exclusions are common in life insurance policies, a provider cannot alter the conditions of an existing policy due to a worldwide pandemic. For those who are in the midst of an application process or who have not yet pursued a life insurance policy, things are a little more complicated.
Like all insurance, life insurance is all about risk. Insurance providers determine premium amounts based on the amount of risk the insured presents to their business. The greater the risk posed, the higher the premium, which is why buying life insurance at a younger age as opposed to older is so often recommended. If someone who hasn’t yet applied or is in the process of applying for life insurance poses a significant risk to the insurer, they may choose to postpone the application until the applicant recovers or deny coverage altogether.
For example, life insurance companies may postpone application approval if the applicant has recently traveled to certain COVID-19 “hot spots”, or if they share a household with someone who has. Initially, these hot spots were limited to countries like China, Italy, and South Korea, but given the widespread presence of the coronavirus all across the world at this point, that list has grown substantially.
Another risk assessment tool utilized by providers is a statement of health, a document in which the applicant answers questions about their medical history and current health. Although a statement of health does not require a doctor’s visit, a provider may require a medical exam depending on the answers given (medical exams are common requirements in life insurance policies). Were the exam to conclude that the applicant is infected with a potentially fatal virus, it would surely have an effect on the insurer’s decision.
Likewise, if someone who thinks they are sick and is displaying symptoms of the flu or some other potentially life-threatening disease lies about their health to the insurer, it probably won’t bode well. Life insurance policies have a contestability period during which any attempts at fraud are investigated, and if evidence of such is found, beneficiaries may never see any of the payout.
While delay or denial of coverage does happen, there are often other options or alternative policies that can be explored when looking for life insurance. There are lots of life insurance companies, all with varying policies, so while you may be rejected by one company, you probably have a chance at being approved by another.
In addition, some providers offer temporary life insurance, which provides coverage in the event an applicant dies during the approval process. Underwriting takes time in applying for life insurance, up to several weeks, and usually requires third party participation. A global pandemic like COVID-19 throws a lot of wrenches into this process, particularly with lockdowns and shelter-in-place orders occurring. With temporary life insurance, approved applicants are considered covered before their primary life insurance kicks in, sometimes with the same level of coverage.
Another option to consider to speed up the application process is applying for accelerated underwriting. Young, healthy applicants with up-do-date medical records are the best candidates for this. However, although accelerated underwriting may guarantee coverage quicker, it may result in a lower coverage amount.
Life insurance is a way of ensuring some level of provision for our loved ones, but it’s sadly overlooked–often by the people who could benefit from it the most. The unfortunate reality is that the COVID-19 outbreak is not over, and could endure for weeks to come. For many of us who previously never considered life insurance, it may be the best indication thus far for us to do so.