Americans who have life insurance will be covered should they die from Covid-19, the disease caused by the new coronavirus, but those who lack coverage or are underinsured should consider moving soon before coverage options dry up.
If the pandemic worsens, industry experts say, life-insurance companies may institute stricter guidelines for underwriting. Insurers might also increase premiums in the future as many are suffering losses on their investments amid the sharp declines in financial markets.
“I have not seen a policy that has a carve-out or an exclusion for a pandemic,” says Erin Ardleigh, founder and president of Dynama Insurance, an independent insurance brokerage firm based in New York City. Still, she says, now is a good time to beef up coverage.
Already, some insurance carriers have begun adding exclusionary riders on new policies to avoid paying out on coronavirus deaths, says Anthony Martin, founder and chief executive of life-insurance company Choice Mutual. “An exclusion rider…could become an industry standard if the morbidity rate causes carriers to experience detrimental financial losses due to an unexpected and unsustainable claims rate,” he says.
Martin also says some carriers may stop issuing new policies if the pandemic worsens, especially for seniors with health issues, and they likely wouldn’t resume issuing policies until a vaccine is available.
Many insurance companies are asking applicants if they’ve been tested or treated for the virus, and then once the policy is approved, they are asking applicants to sign a statement noting that nothing about their health status has changed during the application process.
If a person buys a policy today and dies next month from coronavirus, his family will get the insurance money, so long as the applicant didn’t misrepresent his health status at the time of application, Ardleigh says. Yet if the patient dies within two years of obtaining a policy and the insurance company can prove that he misrepresented his health status, the company won’t have to pay up.
People who have been hospitalized due to the coronavirus and have made a full recovery still may have difficulty obtaining coverage because the typical application asks whether the person had been hospitalized in the past year. But patients who weren’t hospitalized and have recovered typically will have no issue getting coverage, Martin said.
Another factor that could restrict new coverage: overseas travel.
The pandemic has insurance companies asking applicants if they recently have traveled abroad or been on a cruise, and those answering yes typically must wait 30 days before applying for a policy, Ardleigh says. Similarly, some insurance carriers are withdrawing or delaying applications for people who expect to travel overseas.
“If you have plans to travel abroad, you will likely find great difficulty getting a new life insurance application approved, especially if your destination is a hotbed for the virus,” Martin says.
One consideration for workers who rely on life-insurance coverage through their work: If they get laid off during the coronavirus outbreak, that policy likely isn’t portable, Ardleigh says.
“Don’t rely on what you have at work to protect your family, and don’t delay because we certainly could see more restrictions and higher prices in the future,” Ardleigh said.
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