Coronavirus hasn’t entirely ended life as we knew it, but it’s certainly caused changes, some of which are likely to be with us for a very long time.
For some the coronavirus is literally a matter of life and death, and it raises an important question: how does coronavirus affect life insurance?
No one likes to think about the possibility of losing their life, or that of a loved one to this virus, but for over 150,000 families here in the US, it has turned out to be a reality.
Let’s examine the impact it may have on your existing policies, and perhaps more importantly, how it may affect applications for new life insurance coverage.
How Does Coronavirus Affect Life Insurance You Already Have?
There’s good news if you already have a life insurance policy in place. Generally speaking, the insurance company will pay a death benefit even if you die from the coronavirus. With few exceptions, life insurance policies will pay for any cause of death once the policy is in force. There are very few exceptions to this rule, such as acts of war or terrorism. Pandemics are not a known exception.
If you’re feeling at all uncomfortable about how the coronavirus might impact your existing life insurance policies, contact the company for clarification. Alternatively, review your life insurance policy paying particular attention to the exclusions. If there’s nothing that looks like death due to a pandemic, you should be good to go.
But once the policy is in place, there are only a few reasons why the insurance company can deny a claim:
- Non-payment of premiums – if you exceed the grace period for the payment, which is generally 30 or 31 days, your policy will lapse. But even if it does, you may still be able to apply for reinstatement. However, after a lapse, you won’t be covered until payment is made.
- Providing false information on an application – if you fail to disclose certain health conditions that result in your death, the company can deny payment for insurance fraud. For example, if you’re a smoker, but check non-smoker on the application, payment of the death benefit can be denied if smoking is determined to be a contributing cause of death.
- Death within the first two years the policy is in force – often referred to as the period of contestability, the insurance company can investigate the specific causes of death for any reason within the first two years. If it’s determined that death was caused by a pre-existing condition, the claim can be denied.
None of these are a serious factor when it comes to the coronavirus, unless you tested positive for the virus prior to application, and didn’t disclose it. But since the coronavirus can strike suddenly, it shouldn’t interfere with your death benefits if it occurs once your policy is already in force.
How Does Coronavirus Affect Life Insurance You’re Applying For?
This is just a guess on my part, but I think people may be giving more thought to buying life insurance now they may have at any time in the past. The coronavirus has turned out to be a real threat to both life and health, which makes it natural to consider the worst.
But whatever you do, don’t let your fear of the unknown keep you from applying for coverage. Though you may be wishing you bought a policy, or taken additional coverage, before the virus hit, now is still the very best time to apply. And that’s not a sales pitch!
No matter what’s going on in the world, the best time to apply for life insurance is always now. That’s because you’re younger and likely healthier right now than you’ll ever be again. Both conditions are major advantages when it comes to buying life insurance. If you delay applying, you’ll pay a higher premium by applying later when you’re a little bit older. But if you develop a serious health condition between now and then, not only will your premium be higher, but you may even be denied for coverage completely.
That said, the impact of the coronavirus on new applications for life insurance is more significant than it is for existing policies.
The deaths of more than 100,000 people in the US is naturally having an effect on claims being paid by life insurance companies. While there’s been no significant across-the-board change in how most life insurance companies evaluate new applications, the situation is evolving rapidly. Exactly how that will play out going forward is anyone’s guess at the moment.
What to Expect When Applying for Life Insurance in the Age of the Coronavirus
If you’re under 60 and in good or excellent health, and not currently showing signs of the virus, the likelihood of being approved for life insurance is as good as it’s ever been. You can make an application, and not concern yourself with the virus.
That said, it may be more difficult to get life insurance if you have any conditions determined to put you at risk for the coronavirus, as determined by the Centers for Disease Control (CDC).
- Ages 65 and older.
- Obesity, defined as a body mass index of 40 or greater.
- Certain health conditions, including asthma, chronic kidney disease and being treated by dialysis, lung disease, diabetes, hemoglobin disorders, immunocompromised, liver disease, and serious heart conditions.
- People in nursing homes or long-term care facilities.
Now to be fair, each of the above conditions would require special consideration even apart from the coronavirus. But since they’re known coronavirus risk factors, the impact of each has become more important in the life insurance application process.
If any of these conditions apply to you, the best strategy is to work with insurance companies that already specialize in those categories.
There are insurance companies that take a more favorable view of people with any of the following conditions:
- Over 65
- Kidney disease
- Certain lung diseases, including Asthma
- Liver disease
- Certain heart conditions
More Specific Application Factors
But even with insurance companies that specialize in providing coverage for people with certain health conditions, some have introduced new restrictions in light of the coronavirus.
For example, if you have a significant health condition and you’re over 65, you may find fewer companies willing to provide coverage.
The insurance company may also check your records for previous coronavirus episodes or exposures. Expect additional testing to determine if you’re currently infected. Most likely, the application process will be delayed until the condition clears, unless it has resulted in long-term complications.
Travel is another factor being closely examined. The CDC maintains an updated list of travel recommendations by country. If you’ve recently traveled to a high-risk country, or you plan to do so in the near future, you may be considered at higher risk for the coronavirus. How each insurance company handles this situation will vary. But your application may be delayed until you’ve completed a recommended quarantine period.
Other Financial Areas to Consider that May be Affected
Since the coronavirus is still very much active in the US and around the world, financial considerations are in a constant state of flux. If you’re concerned at all about the impact of the virus on other insurance types, you should contact your providers for more information.
Other insurance policies that my warrant special consideration are:
- Employer-sponsored life insurance. There’s not much to worry about here, since these are group plans. Your acceptance is guaranteed upon employment. The policy will almost certainly pay the death benefit, even if your cause of death is related to the virus.
- Health insurance. There’s been no media coverage of health insurance companies refusing to pay medical claims resulting from the coronavirus. But if you’re concerned, contact your health insurance company for clarification.
Action Steps to Take in the Age of the Coronavirus
Many have been gripped by fear in the face of the coronavirus, which is mostly a fear of the unknown. But the best way to overcome fear is through positive action.
I recommend the following:
1. Be proactive about your health.
Since there is a connection between poor health and the virus, commit to improving your health. Maintain a proper diet, get regular exercise, and follow the CDC coronavirus guidelines on how to protect yourself.
2. If you need life insurance, buy it now.
Don’t wait for a bout with the virus to take this step. It’s important for a number of reasons and the consequences of not having it can be severe. Compare the best life insurance companies to get started.
3. Consider no medical exam life insurance.
If you don’t have the virus, and you want to do a policy as quickly as possible, no medical exam life insurance will be a way to get coverage almost immediately.
4. Look for the lowest cost life insurance providers.
Low cost means you can buy a larger policy. With the uncertainty caused by the coronavirus, having enough life insurance is almost as important as having a policy at all. Look into cheap term life insurance to learn more about what you can afford.
5. Keep a healthy credit score.
Did you know that your credit score is a factor in setting the premium on your life insurance policy? If so, you have one more reason to maintain a healthy credit score. One of the best ways to do it is by regularly monitoring your credit and credit score. There are plenty of services available to help you monitor your credit.
6. Make paying your life insurance premiums a priority
This action step rates a special discussion. When times get tough, and money is in short supply, people often cancel or reduce their insurance coverage. That includes life insurance. But that can be a major mistake in the middle of a pandemic. The coronavirus means that maintaining your current life insurance policies must be a high priority.
The virus and the uncertainty it’s generating in the economy and the job market are making finances less stable than they’ve been in years. You’ll need to be intentional about maintaining financial buffers.
7. Start an emergency fund.
If you don’t already have one place, start building one today. If you already have one up and running, make a plan to increase it regularly.
You should also do what you can to maximize the interest you’re earning on your emergency fund. You should park your fund in a high-interest savings account, some of which are paying interest that’s more than 20 times the national bank average.
8. Get Better Control of Your Debts
In another direction, be purposeful about paying down your debt. Lower debt levels translate into lower monthly payments, and that improves your cash flow.
If you don’t have the funds to pay down your debts, there are ways you can make them more manageable.
For example, if you have high-interest credit card debt, there are balance transfer credit cards that provide a 0% introductory APR for up to 21 months. By eliminating the interest for that length of time, you’ll be able to dedicate more of each payment toward principal reduction.
Still another strategy for lowering your debts is to do a debt consolidation using a low interest personal loan. Personal loans are unsecured loans that have a fixed interest rate and monthly payment, as well as a specific loan term. You can consolidate several loans and credit cards into a single personal loan for up to $40,000, with interest rates starting as low as 5.99%.
We’ve covered a lot of ground in this article. But that’s because the coronavirus comes close to being an all-encompassing crisis. It’s been said the coronavirus is both a health crisis and an economic crisis at the same time. It requires strategies on multiple fronts, including protecting your health, your finances, and your family’s finances when you’re no longer around to provide for them.
That’s where life insurance comes into the picture. The basic process hasn’t changed much from the coronavirus, at least not up to this point. But that’s why it’s so important to apply for coverage now, before major changes are put into effect.