Life insurance offers financial protection for your loved ones in the event that you die unexpectedly.
When a pandemic becomes world news, you may start to consider the necessity of purchasing a policy or wonder how news of an outbreak might shape the policy you already have.
A global health crisis like the widespread COVID-19 outbreak that began in late 2019 can make applying for life insurance more complicated. But as long as you have an active policy in place, if you were to die of a pandemic illness, your family would still receive the death benefit, even if you had knowingly traveled to areas with a known disease outbreak.
Essentially, life insurance covers pandemics, assuming you were truthful about your travel plans and exposure to illness during the application process.
Applying for life insurance during the coronavirus outbreak
While the long-term ramifications of COVID-19 aren’t yet known, its rapid spread around the globe has many on high alert. Barring any major changes, however, it’s likely that the coronavirus will have a larger impact on people who are applying for a life insurance policy than those who already have a policy in place.
“The most immediate implication coronavirus has on life insurance is on applicants. If you’re applying for life insurance now and planning a trip to a country that’s heavily impacted by the disease, you’ll likely need to wait until after your return to complete your application,” explains Nicholas Mancuso, manager of the disability and advanced planning team at Policygenius. “But if you already have life insurance, and you die from coronavirus, your beneficiary will still receive the survivor benefit.”
Depending on the life insurance company, there is a chance that your application for life insurance could be affected if you’re traveling to an impacted area.
Some life insurance companies have no changes in their application approval based on the current spread of the virus, while other insurers may offer policies on a case by case basis or hold off on application approval altogether if:
You have traveled to China within the last 30 days
You have future plans to travel to China
You have recently returned from Wuhan Province
You are have recently traveled to or are planning to travel to areas more recently affected by the virus, such as Hong Kong, Italy, Iran, Japan, Mongolia, South Korea, Taiwan, and Vietnam
Additionally, some life insurance companies may postpone applications for anyone who has future plans to travel outside the U.S. or has recently returned from travel outside the U.S. A statement of good health for all new and pending life insurance applications could also be required.
How each life insurance company treats your application if you happen to contract coronavirus will also vary. Some life insurance companies may reject your application or postpone your offer until you have made a full recovery.
As the nature and impact of the coronavirus continues to develop, how insurers approach life insurance applications and policies could change. However, for the time being, your best bet on getting the best life insurance policy is to shop around and cancel any unnecessary travel to affected areas.
While one life insurance company may not offer you a policy based on your recent travel, others may offer you optimal coverage at competitive rates. A Policygenius advisor can work with you for free to help you shop around for the right life insurance policy.
No medical exam life insurance
During the current coronavirus pandemic, some states are prohibiting in-house medical exams as an added safety precaution. While a no medical exam life insurance policy can be costlier and might not always offer optimal coverage, you have a few policy options that don’t necessitate a medical exam.
It’s important to note that getting a policy that doesn’t require a medical exam still requires recent medical records and doesn’t necessarily shorten the life insurance application process. If you want a faster turnaround time after you apply, you’ll have to get a plan with accelerated underwriting. An accelerated application also doesn’t require a medical exam, but not everyone qualifies and applications can be rejected at random.
No medical exam temporary coverage
If you want to ensure that you’re covered during the coronavirus pandemic while you await a decision on your life insurance application — you don’t have to sacrifice optimal coverage for your safety and health if you cannot get a medical exam.
You can opt-in for temporary life insurance coverage, which is the coverage you get during the life insurance application process so that if you die, your beneficiaries still get some death benefit. This would enable you to postpone the medical exam portion of the underwriting process until the coronavirus outbreak subsides. However, most life insurance companies still require the completion of the medical exam for temporary coverage to go in force.
What is a pandemic?
According to the World Health Organization, a pandemic is the global spread of a newly introduced disease, while an epidemic is when a disease is constrained to one region.
Pandemics of the past, such as the 1918 Spanish flu, have been famously deadly. But thanks to modern medicine and proper intervention, there are now many more tools for tracking and preventing pandemics. Regardless, pandemics tend to cause some uncertainty and it’s important to think about setting up a financial plan like life insurance.
How life insurance companies treat pandemics
Because your health and medical history are determining factors in what type of policy premiums you pay for life insurance, it’s reasonable to assume that a global health crisis like the coronavirus would have some impact on your policy if you’re currently in the application process (or thinking of starting it).
Coupled with the risk-averse nature of life insurance companies, anytime there’s a chance that an individual’s risk of mortality has increased, insurers are probably going to either hold off on insuring you or you are going to pay higher life insurance premiums on your policy.
However if you already have life insurance in place, you’re covered. In the rare event you were to die from a pandemic illness, your beneficiaries would still receive the policy’s death benefit.
Active life insurance policies
If you already have a life insurance policy and you pay your premiums, there’s no reason to sound the alarm. Whether you’re traveling to a highly compromised area or a pandemic has hit home, life insurance companies can’t change the health classification or rates you pay on a policy that is already in force.
Likewise, if you die from a pandemic disease or travel to a country with a CDC COVID-19 travel alert, life insurance companies can’t deny your family the death benefit.
While some life insurance policies have exclusions for specific causes of death — like if you were to die while doing a high-risk activity or in an act of war, there is no pandemic exclusion for life insurance.
However, if you are currently going through the life insurance application process or you recently purchased your life insurance policy, the outbreak of a pandemic can have an effect on your application and your policy.
Life insurance premiums during a pandemic
Similar to any other medical diagnosis, the severity of an illness can impact your life insurance rates when you’re applying for a policy. While simply getting a virus, such as the seasonal flu, won’t cause a price hike in your life insurance premiums, some of the ramifications of getting ill can.
If you were to contract the coronavirus and it caused long-term impact on your overall health before you applied for life insurance, you might end up receiving a lower health classification and a costlier life insurance policy.
For the most part, however, if you get ill, make a full recovery, and later apply for life insurance, you can expect that the price difference in life insurance premiums will be minimal. And, as we mentioned above, if your policy is already in force and you contract the coronavirus, there won’t be any impact on your premiums.
Recent life insurance applications
If you recently purchased a life insurance policy and did not disclose travel plans to an area affected by a pandemic like COVID-19 on your application, or lied about contracting the illness, then there is cause for concern.
Life insurance policies have something called the contestability period, usually the first two years after your policy goes in force, during which the life insurance company can revisit any information you may have misrepresented during the application process.
If you withhold information about your travel to a high-risk country, contract the disease in question, and pass away from it, the life insurance company can refuse to pay out the death benefit to your beneficiaries.
While the contestability period is the time when a life insurance company is most likely to investigate claims for any potential fraud, if your insurer finds out that you lied after this period they can still withhold the death benefit from your beneficiaries.
If you are applying for a life insurance policy and have travel plans to an affected area or have gotten sick, it’s important to be honest about this — and everything else — during the underwriting process so that you don’t risk the invalidation of your policy.