Am I Covered? What You Need to Know About Life Insurance and COVID-19

Nels GriffinNews

As COVID-19 continues to surge across many parts of the world, claiming thousands of lives each day, countless people have wondered if they would be covered by their life insurance policy in the event that they contract and are overtaken by the virus. In most cases, the policyholder will be covered, and insurance will probably pay out for a death resulting from the novel coronavirus. However, according to representatives from life insurance specialists and industry organizations, there may be some exceptions.

Why Would Coverage Be Denied?

If you have an active whole or term life insurance policy that is in good standing, your beneficiary will receive the payout if you were to pass away from complications due to COVID-19. However, there are several factors that could put you outside of that bracket. Some examples of those are:

· Failure to pay insurance premiums

This would disqualify your policy from being in good standing. Insurance policies can always lapse due to nonpayment. If this were to happen, the policyholder would have to catch up on late payments to get the policy reinstated again before their death. If this is not done, their beneficiary will not receive any kind of payout. During the coronavirus pandemic, some insurers are extending grace periods for late payments—which are typically 30 or 31 days—in an attempt to provide relief for policyholders who may be struggling to make their payments on time. If you find yourself in this position, be sure to contact your life insurance provider, since they may be able to work with you and provide options to help keep your policy in good standing.

· You only have an Accidental Death & Dismemberment (AD&D) policy

True to the name, accidental death and dismemberment policies are designed to protect your beneficiaries in the event that you were to die or suffer bodily dismemberment accidentally—for example, from a car crash or a workplace injury. These are a common option for people who work in hazardous environments, have especially long commutes and drive more than the average person, or those who are unable to qualify for life insurance due to medical reasons. If the policy that you purchased is limited to AD&D, death from illness or natural causes will not be covered under this type of insurance. However, if you purchased AD&D coverage in addition to a standard life insurance policy, you would still be covered under your main traditional policy if you were to die from complications due to COVID-19.

· Your life insurance application was inaccurate or incomplete

When submitting an application for a life insurance policy, it is important to be as thorough and accurate as possible when filling out your information initially or applying for a renewal. It might seem like no big deal to ballpark your income or your current weight, or leave a city or two out when detailing your travel plans, but in the event that the insurance company is asked to pay out for a COVID-19-related death, it’s all going to come down to the details. You may be familiar with the Two-Year Contestability Period for life insurance. Basically, that means that if you were to pass away within the first two years of your life insurance coverage, the insurance company has a right to contest your claim. They may decide to dig deeper into the details of your medical history to make sure that you did not misrepresent any information on your application. If evidence of this is found, the insurance company can cancel your coverage or deny a claim. This could result in the withholding of some or all of the payout to your beneficiary. After this two-year period is over, the policy is usually considered incontestable. But an important thing to keep in mind is, if your coverage ever lapses, a new contestability period may go into effect when you reinstate or purchase a new life insurance policy. Once again, the insurance company will have the right to refuse to pay a claim if false information is found on the application. Therefore, it is extremely important to take your time to make sure that any and all information that you fill out on your application is as accurate as possible.

life settlement beneficial
Senior couple discussing their pension options with a financial consultant

What if my policy is in good standing?

If you have a whole or term life insurance policy in good standing, your insurer cannot change your premiums or health classification. So even if you do contract COVID-19, develop any type of respiratory illness that is caused by the virus, or are at a higher risk of exposure due to your job or recent travel to a virus hot spot, your active policy is secure and will remain unchanged.

What if I get laid off?

This can be a tricky situation. Many group life insurance policies—or those you signed up for through work—will only cover you if you continue to be employed by that company. Aside from that, most of those policies tend to be accidental insurances, which, as previously mentioned, would not cover death from an illness such as the coronavirus. For this reason, many people have found it beneficial to have a separate life insurance policy from any group life insurance that they receive through their employer. A separate policy can be personalized to your specific needs and kept active despite any changes in employment or anything else that life may throw your way.

Conclusion

As the coronavirus pandemic lingers, it is only natural for people to be considering any and all possible outcomes, even worst case scenarios. In the unfortunate event of their absence, everyone wants their loved ones to be financially protected and free from any costly burdens that can be avoided. If you have any questions about your life insurance policy coverage during the pandemic, your insurance provider is a great resource. And if you have an active policy and are interested in taking advantages of an alternative option such as a life settlement, the team at ALIR Settlements is always at your service as well.

Sources:

https://www.aarp.org/money/budgeting-saving/info-2020/insurance-policies-during-coronavirus-faq.html

https://www.investopedia.com/terms/a/accidental-death-benefit.asp

https://www.nylaarp.com/Learning-Center/Learn-the-Basics/2-Year-Contestability-Period-For-Life-Insurance