This content is for information and educational purposes only. It should not be taken as financial advice or investment advice. To receive tailored, regulated financial advice regarding your affairs please consult us here at Hanson Financial Services (financial advice in Liverpool).
Interest in life insurance shot up during the COVID-19 pandemic. In the US, reports of “panic buying” emerged in October 2020 as many Americans (particularly young adults) worried about the increasing risk of death posed by the virus. Google Search traffic for “life insurance” jumped 50% between March and May, and some insurers saw a 15% rise in policies sold in the April to September period. Yet how does life insurance work in relation to COVID-19, exactly? Will your policy pay out should you die after contracting the virus?
These kinds of commonly-asked questions are important. Our team here at Hanson Financial Services (financial advice in Liverpool) offers some answers, below. We hope you find this content useful and invite you to get in touch if you’d like to discuss your own mortgage or financial plan with us.
Has COVID-19 made it harder to get life insurance?
Since the outbreak of COVID-19 in the UK during early 2020, most life insurance companies have added extra questions to their application forms. Many of these pertain to COVID-19, and ask questions such as: “Have you exhibited COVID-19 symptoms in the last 30 days?”, “Have you been asked to self-isolate?”, “Have you tested positive for COVID-19?” and “Have you had any direct contact with a COVID-19 patient?” If you answer “Yes” to any of these questions, then it is likely to make the application process longer.
Can waiting help the process?
In some cases, waiting a short while can help you with a life insurance application. For instance, certain insurers might ask if you have tested positive for COVID-19 within the last three months. If so, then you may be asked to wait during a “postponement period” – after which, you could reapply or the process resumes. However, bear in mind that if you have experienced “serious” symptoms (e.g. you needed a ventilator) then you will likely need to wait much longer.
Do COVID-19 symptoms make life insurance more expensive?
Many insurers simply will not offer you a policy until your COVID-19 symptoms have subsided. However, once enough time has passed and you have made a full recovery, standard rates may be offered to you. Generally, insurers have not been asking applicants to attend a nurse medical screening, or for extra information from GPs. However, in some cases this may be required and cause delays. Remember, the main factors which drive up the price of life insurance are your mortality risk, the amount of cover you’d like to secure and the length of time you want insured.
What about my existing policy?
If you have already taken out life insurance (and the term has not expired) then this should not be affected by COVID-19. It is rare to hear of insurance plans containing exclusions pertaining to pandemics, although you should check the fine print for peace of mind. As such, if you caught COVID-19 and died from the virus, your existing policy should pay out a lump sum.
What if I am just self-isolating?
If you have not exhibited COVID-19 symptoms but are self-isolating due to having contact with someone who has, then your application for income protection is likely to be postponed until the self-isolation period is finished. If, however, you have been self-isolating due to your own covid symptoms, then your application could be delayed by one month, three months or more.
What about critical illness cover?
Many life insurance policies also contain provisions to pay out a lump sum if the policyholder is diagnosed with a specified critical illness. However, in our experience most critical illness cover policies will not pay out if you are diagnosed with COVID-19. Some policies make mention of “Respiratory Failure – Of Specified Severity”, but the virus is widely regarded as unlikely to lead to permanent impairment to lung function (to qualify for this criteria). Fortunately, most people who are diagnosed with COVID-19 are likely to recover.
Can I get income protection if I get COVID-19?
Income protection pays out a regular replacement income if you find yourself unable to work due to a defined illness/injury. If you become disabled due to COVID-19, then your insurer will need to conduct a claims process and assessment to determine whether this satisfies criteria within your policy. This may involve getting more information from your GP. If this process is successful, then an income protection policy could pay out. However, bear in mind that your insurer is likely to take into account how you caught the virus. If it transpires that you caught COVID-19 due to breaking social distancing rules, for instance, then the policy may not pay.
What if I haven’t kept up my premiums?
COVID-19 has left many people in financial difficulty due to furlough, lost hours and redundancy. Some insurers have offered a deferment period (e.g. up to three months) so people can keep their policy valid, and pay later. However, this needs to be agreed with your provider before you suspend any premium payments. If you do this unilaterally, or miss a payment unintentionally, then bear in mind that this is likely to invalidate your policy.
Conclusion & invitation
Are you interested in talking to a financial adviser about your financial planning needs? We’d love to assist you here at Hanson Financial Services.
Please contact us to arrange a consultation with our team – free and without obligation – to gain more clarity and peace of mind over your financial plan.
You can call us on:
Liverpool Office: 0151 708 7616
Manchester Office: 0161 401 0991
Chester Office: 01244 960 039
Or email via: [email protected]
