Ultimately, COVID-19 has impacted on all of our lives in one way or another, so it should come as no surprise that it has affected the life insurance application process too.
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How has COVID-19 impacted Life Insurance?
Since the outbreak of COVID-19, many life insurance companies have introduced new questions to their application forms. This has been done in order to establish and manage the insurance risks it poses.
The questions that they are asking are to establish if someone has:
Coronavirus symptoms (for example a new continuous cough and/or a high temperature)
Been advised to self-isolate
Tested positive for Coronavirus
Had direct contact with someone who has tested positive for or suspected to have Coronavirus.
If you have a recent history of any of these then it's likely that any application may be postponed.
Please also be aware that providers are increasingly withdrawing their 'Free cover' during underwriting. Please refer to the provider Key Features Document for more information regarding this.
Existing customers - Life Insurance claims
Claims against existing life insurance plans should not be impacted at all as the underwriting at the time of placing their policy live would not have known of this coming risk. Coronavirus claims will be made against the terms and conditions of the existing plan and the usual claims terms.
We do not know of any plans that have contained exclusions in relation to pandemics or the contraction of a virus in a foreign country, so long as you have accurately declared any previous/expected foreign travel.
One note specifically regarding Income Protection policy claims is that usually the Insurer would get written confirmation from your GP that you are unable to work due to accident or illness. If this confirmation isn’t available, for example you are having to self-isolate, insurers are working hard to agree alternatives to ensure that they can pay claims quickly.
Life insurance payouts for COVID-19 in the UK
The ABI (Association of British Insurers - a UK-based trade body representing over 200 insurance companies) has recently stated that according to the latest estimates, ABI members expect to pay up to £2.5 billion for COVID-19 insurance claims incurred in 2020.
Of this, £204 million paid from COVID-19 related protection insurance claims, including life, critical illness, and income protection insurance claims.
“The COVID-19 pandemic is unprecedented in its impact and will be one of the biggest insured events of recent times. These latest estimates demonstrate the range of support ABI members expect to offer their customers as a result of COVID-19 related claims across a wide range of insurance policies. This data was collected from individual firms by the ABI in mid-late January, and millions of pounds continue to be paid out every week in claims settlements.”
Huw Evans, Director General (ABI)
The Association of British Insurers (ABI)
The Association of British Insurers (ABI)
Can I still get life insurance for COVID-19?
Insurers are still offering life insurance cover and it’s possible to still get cover if you need it. The main difference today, compared to the time before coronavirus, is that some insurers are asking more questions when you apply for life insurance. They will want to understand if you have COVID or have symptoms of COVID. They may also want to know if you’ve recently travelled to a part of the world that is classed as high-risk for the virus.
If you answer ‘no’ to these questions, you should be able to get life insurance as normal but will possibly face some delays given the business disruption caused by the pandemic.
If you answer ‘yes’ to any one of these questions, the insurer may decide to delay, or postpone your policy, so that they only cover you once they know for certain that you don’t have the virus.
Be honest when you apply for a policy and answer all application questions as accurately as you can. Insurers can decide not to pay life insurance claims if they find out that someone hasn’t been completely honest in their application, which would essentially make the policy worthless.
Would the policy pay out if I got coronavirus?
Yes, your life insurance policy would pay out if the worst were to happen and you passed away from coronavirus. This is, of course, provided you were completely honest when you applied for your policy.
Life insurance companies generally don’t trade in grey areas, they consider only one question; is the person alive or not? If they are not, then the policy pays out, regardless of the cause.
This really is the purpose of life insurance, to give you peace of mind that your family would be financially looked after if you were to pass away, as a result of coronavirus, or any other cause.
Will life insurance be more expensive because of coronavirus?
Life insurance quotes depend on a number of things, but essentially, the price you’re charged will reflect how likely you are to claim. The higher your chances of making a life insurance claim, the more expensive cover will be for you. When insurers expect there to be more claims generally, they will increase life insurance prices for everyone.
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Will I still need my policy when coronavirus is over?
In short - yes!
Our advisers have seen a 75% increase in insurance enquiries since the onset of the virus, which is not surprising given that people are worried about the consequences of COVID-19 and the financial impact it could have on them and their families.
But, coronavirus or no coronavirus, there are still lots of reasons to consider life insurance.
As humans we face all kinds of risks every day. For example, one in two people will get some form of cancer in their lifetime, and one in four of us will experience some sort of mental health problem each year.
It’s still important to think about how you would protect your loved ones should you sadly no longer be here, regardless of whether the coronavirus scare is ongoing or not.
What policy will I need?
The main thing most consumers need to know is that there’s two main types of life insurance; 'term' life insurance and 'whole-of-life' insurance.
‘Term’ life insurance policies run for a fixed period of time (known as the ‘term’ of your policy) eg. 10, 15 or 25 years - but only pay out if you were to die during the term of the policy. There’s no lump sum payable if you live beyond the term.
These policies can be taken out as Single or Joint policies, which are similar, but with a few key differences:
Single or Personal Life Insurance covers one person and if the policyholder were to die during the term of the policy, their loved ones would receive a payout. If you and your partner were to decide to take out two separate ‘single’ policies, then a payout could then be claimed for each policy if both policyholders die within the term.
Joint Life Insurance covers two people on a single policy and means there’s only one monthly premium to pay. Some people find this simpler to manage and you’ll only need to complete one application, but you would have to answer questions for both policyholders.
‘Whole-of-life’ insurance policies (also known as Life Assurance) pay out regardless of when you die, as long as you keep up with your premium payments.
Having savings as extra protection is also a good idea, as is working towards paying off whatever existing debts you may have, however it shouldn’t be considered a substitute for having a life insurance policy in place.
What about critical illness cover and income protection?
Critical illness insurance is a policy that pays you a lump sum of money if you fall ill with one of a number of specified serious illnesses, which are defined by the insurer. Thinking about your situation, a payout from a critical illness policy could be used to replace your income and cover your bills. Alternatively, you may want to pay off your mortgage, if you have one, so that you no longer need to make repayments.
Income protection insurance, on the other hand, replaces your income if you are unable to work due to illness or injury, paying you a monthly benefit amount, up to around 70% of your gross pay. This regular monthly income would help to cover your monthly bills, reducing financial worries and allowing you to focus on the important things, like making a full recovery.
Do both types of insurance cover coronavirus?
Critical illness policies don’t currently include coronavirus as a specified illness, so in the unfortunate event that you contracted the virus, it’s unlikely that you’d qualify for a payout from your policy. There would, however, be the possibility of a payout if the virus led to you developing other complications such as kidney, liver, heart or respiratory failure.
As always with insurance, it’s important to carefully check the policy’s terms and conditions which will explain exactly what conditions are covered.
It’s also worth being aware that most critical illness policies are in fact purchased with life insurance attached. So, if the worst were to happen, and you sadly passed away as a result of COVID-19, your family would likely receive a payout from the policy.
Income protection policies will typically pay out for any illness or injury that means you need to take time off work. So, if you were to develop coronavirus and became too ill to work, your income protection policy should pay out your monthly benefit as normal.
It’s important to know that income protection policies come with a deferred period, which is the point at which you start receiving monthly payments from your policy. If you buy an income protection policy with a long-deferred period, say three months, and then catch coronavirus, you may actually recover before the end of that three-month period, and therefore not receive a benefit payment from your policy.
We Shop Around, So You Don’t Have To
To help find the best life insurance policy for you, we won’t limit your search to just one company.
Cavendish Online is committed to ensuring our fees and charges are highly competitive and transparent - so you know exactly what you are paying for when you use our different services.
We can help you find the best and most affordable option for your individual circumstances, with products from leading financial service providers and the best value possible with minimal charge amounts.
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Once you’ve given this information some thought, it’s then really easy to arrange and compare life insurance. Simply enter your details into our site, and we’ll ask some questions to generate quotes so you’ll be able to see what policy works out best for you.
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If you don’t currently have any cover in place or if you’re not sure that it still meets your needs - the team at Cavendish can help.
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