Are Pandemics Covered by Life Insurance?

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The COVID-19 epidemic has impacted a variety of industries around the world, including the insurance industry. Here's what you need to know about life insurance if you have one or are thinking about getting one at this tough time.

TAKEAWAYS IMPORTANT

• A life insurance policy will pay death benefits if the policyholder dies from COVID-19 as long as the policy is in good standing.
• Life insurance policies with dread illness riders only cover the conditions they specify, thus unless a viral disease like COVID-19 is included, the rider is unlikely to pay out.
• During a pandemic, it is still feasible to purchase new life insurance policies, however the application process and list of questions may alter.

Existing life insurance policies will not be impacted.

It doesn't matter how a policyholder dies as long as the policy is in good standing and the premiums are paid on time. As a result, if a person dies as a result of COVID-19, the policy's death benefit will almost likely be paid to their beneficiaries. In contrast, some types of insurance, such as travel insurance, may have COVID-19 or pandemic exclusions.

According to Steven Weisbart, chief economist of the Insurance Information Institute, an industry-sponsored body, life insurance claims are rarely denied. "It's generally because the policies had lapsed owing to non-payment of premiums or the policyholders had submitted erroneous or misleading information at the time of application or renewal," he recently noted on his organization's blog.

Riders with dread diseases are not permitted to apply.

A dread illness rider on a life insurance policy may or may not pay out if the policyholder acquires COVID-19. If the policyholder is diagnosed with specific diseases or conditions while still alive, such as cancer, kidney failure, stroke, or heart attack, these riders offer a portion of the death benefit while the policyholder is still alive. The rider may be of little benefit unless the policy specifically covers viral infections like COVID-19. However, according to the Society for Human Resource Management, if COVID-19 causes a medical concern covered by the rider, such as organ failure, the rider may pay benefits.

There are still new life insurance policies available.

Though some insurance companies briefly stopped accepting new life insurance applications during the COVID-19 pandemic's early phases, the majority are currently accepting them. Any medical exam that the insurer might have otherwise demanded may be waived to meet with local social distancing requirements.

You should anticipate to be asked specific pandemic-related questions about your health and travel, such as whether you've had, been treated for, or been vaccinated for COVID-19, and whether you've traveled to any high-risk countries or places, in addition to the typical kinds of information you'll be asked.

Most insurers will not offer a new life insurance policy unless you can verify that you have recovered from the coronavirus.

What Happens If Your Insurance Company Fails?

COVID-19's rise in deaths will, of course, have a financial impact on insurance companies. Fortunately, insurers in the United States are required by law to maintain a reserve fund to meet claims. When an insurer runs into major financial difficulties, the state where it is based may step in to help (insurance companies are regulated at the state level).

As explained by the National Organization of Life and Health Insurance Guaranty Associations, "Even if the company is taken over by the insurance department, claims will be honored as long as premiums are paid and there is cash value. State guaranty associations will cover the claims, either paying them immediately or transferring the policies to a financially solid insurance provider."

COVID-19-related deaths, like those caused by other causes, will be covered by life insurance policies. Most insurers still offer life insurance, so you can get it if you need it.