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Winter 2020  Volume 13, Number 4        
 

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Your Life Insurance Options During the COVID-19 Pandemic

With the news media reporting daily on the number of COVID-19 cases and deaths, it's not surprising that many people are concerned about whether their families will be taken care of if they contract the disease and die.

Life insurance can be an easy way for individuals to provide financial support to loved ones. There are two main types of life insurance — permanent life and term life. Permanent life coverage stays in effect as long as you pay the premiums. It may also accrue a cash value. In that respect, it is like an investment coupled with an insurance policy. Term life is pure insurance (no investment component) and covers you for a specific amount of time — usually 10 to 30 years.

Even though the pandemic has increased the risk for life insurance carriers, individuals who already have an inforce life insurance policy should be covered (see below).

Here's what you should know if you have life insurance or you'd like to get life insurance (or get more life insurance):

You Have a Policy

In general, if you have a life insurance policy and you die of an illness such as COVID-19, your beneficiaries will receive the death benefit. While life insurance companies can have exclusions for specific causes of death, like participating in a high-risk activity or an act of war, there are no exclusions for a pandemic — even if you travelled to an area with a COVID-19 travel alert.

However, there are some exceptions when an insurer could decline a claim for a COVID-19 death:

  • You are not current on your insurance premiums. Most insurers allow a grace period of 30 to 31 days to make a payment. If you do not meet the deadline, your policy will lapse and if you die before the policy is reinstated, your beneficiaries will not receive a payout.
  • You did not tell the truth. It will not reflect on you favorably if you do not disclose information on your application about your health, weight, travel plans and exposure to the coronavirus. Insurers generally closely examine claims and the initial application when an individual dies within the first two years of coverage.
  • You bought a policy that does not cover illnesses or diseases. Accidental death and dismemberment (AD&D) insurance covers accidents. However, if AD&D coverage is added to a standard life insurance policy as a rider, then the traditional policy would still pay out for a death from COVID-19.

You Do Not Have a Policy

You can still apply for life insurance. but it might take longer to get approved depending on where you live. Many insurance companies are making the application process easier by waiving the paramedical exam for certain face amounts and utilizing electronic applications.

One factor to take into consideration is whether you recently traveled or are planning to travel to an area with a high concentration of COVID-19 cases. Consider waiting to send in your application. If you test positive for the coronavirus, the insurance company might postpone any decisions on your application for 30 to 90 days until you've made a complete recovery. This would also apply if you've come in close contact with someone who has COVID-19.

Keep in mind that if you are quarantining in a state other than the state where you permanently reside, you may be required to fill out paperwork that matches the state you currently are in.

It is still too early to tell how life insurance companies are going to determine premiums on new policies for people who contract the coronavirus. It is assumed, though, that those who developed a severe case of COVID-19 and experienced long-term effects will pay a higher premium.

Older adults, or those who have certain medical conditions that make them more susceptible to the coronavirus, may find it more difficult to get coverage. Some insurers have adjusted their maximum applicant age and insurable underlying health conditions making it harder for some people to be eligible for life insurance. If you run into that situation, let us shop around for you. Not all insurance companies have the same requirements.

The most important thing you can do is be honest about your situation, including your travel plans and exposure to COVID-19 during the application process. If you decide to "fudge" a bit, your beneficiaries may not receive the death benefit even though you paid all the premiums.

This is a good time to let an experienced insurance broker shop around for you. Give us a call.

 

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In this issue:

This Just In...

Your Life Insurance Options During the COVID-19 Pandemic

Health Benefit Options for Those Who Are Disabled

Tips for Saving for Retirement — Even When Budgets are Tight

Depression — No Excuse Not to See a Doctor

 


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