The Coronavirus also known as Covid-19 at the time of this writing in March of 2020 is dominating the news. It is affecting virtually every business and everyone. So how are life insurance companies dealing with this? I was asked this question by a client recently. At this point, we don’t know. I can make some observations. I would say they are following this virus closely. All insurance companies have health questions on their applications that a potential client has to answer yes or no to be accepted by an insurance company and be approved for a life insurance policy. For example, a question looks like this. In the last two years has the proposed insured been diagnosed with a stroke, heart attack, internal cancer or chronic kidney disease?
The applicant would have to answer this question no to be approved for a life insurance policy. Unless it is a Graded Death Benefit life insurance policy. More on that later. It may come to the point that life insurance companies include a question about the Coronavirus that may look something like this.
Have you ever been diagnosed with the Coronavirus or any lung disease? We do not know how this virus is going to affect the underwriting for insurance companies. All insurance companies assess risk. There are people who are called Actuaries that are professionally trained to assess risk for insurance companies. This is based on what is called actuarial science. Actuary qualifications require business knowledge, how humans behave and analytical skills to determine how to manage programs and determine risks. The next paragraph will explain what MAY happen if you apply now for life insurance.
Life Insurance Companies may add Potential Riders
Life insurance companies may place what is known as a “rider” in the insurance contract. This is like a clause or an addition to the contract. For example, in a life insurance policy, it may look something like this- if the proposed insured dies from any lung disease, this policy will not pay out any benefits to the beneficiary. A rider for the coronavirus may look like this- This life insurance policy will not cover any claim related to the Coronavirus or Covid 19. Now back to what is called a Graded Death Policy. A Graded Death Benefit policy has no health questions on the application. It is also called Guaranteed Issue.
How Graded Death Benefit Policies Work
You could have Cancer, Aids or terminal illness and still be approved for a life insurance policy. This is great news. Here is more information about how insurance companies pay out a claim to a beneficiary. In a typical life insurance policy, the beneficiary would receive the whole face amount. For example, if the proposed insured signs up for a 10,000 policy, the beneficiary receives the full 10,000.
A Graded Death Benefit policy would only give the beneficiary 100% or 110% of the premiums paid by the policyholder in the first two years. If the insured dies in year three of the policy the beneficiary receives the full face amount of the policy. This is not a bad thing at all because at least an applicant can get a policy instead of being turned down. If you have any questions about how this works, please call our office toll-free at 866-598-8170.
Why Can’t I Apply for a New “typical” Life Insurance Policy if I have the Coronavirus?
On every life insurance application other than a Graded Death Benefit policy, there are health questions that read something like this- Are you currently hospitalized or receiving home health care? Some say- Have you been hospitalized in the last 3 months? Another question reads: Have you been hospitalized in the last year? If you answer yes to either of these questions then you will be declined.
What if I said I didn’t have the Coronavirus and Lied on the Application?
Let’s say you answered no to the above questions and had the Covronavirus that caused you to be hospitalized. Then you passed away for any reason during the first two years of the policy. Life insurance companies have a contestability clause. This gives the insurance company the right to investigate claims during the first two years of a policy. In some states, it is for one year. Before a claim is to be paid, the insurance company will order a copy of your medical records to find out if you misrepresented your health when you applied for life insurance. Misrepresentation is a false or misleading statement that, if intentional and material can allow the insurance company to void the insurance contract. If there is no evidence of misrepresentation then the contract will be paid in full.
What if I already have a life insurance policy? Will my claims be paid?
If you have a life insurance policy currently and die from the Coronavirus, your beneficiary will still receive the payout amount from your policy. Since you took out your life insurance policy before the Coronavirus, you are fully covered. What if my insurance company has to pay out a large number of claims in one time period? Insurance companies have assets in place for these circumstances. In fact, before an Insurance Commissioner approves a company or product to be sold in your state he or she goes over the companies assets to be sure they can pay out claims as needed.
Can I apply for life insurance during the Coronavirus outbreak?
Yes, you can apply, however, life insurance companies may be handling this pandemic by not accepting new applications. This could mean a few things. They could stop accepting new applications from anyone or they could stop any new applications from high-risk groups. For example, this virus is affecting high-risk groups such as older adults, people with asthma and HIV. The insurance companies may also ask if you expect to travel outside the United States especially to high COVID-19 outbreaks such as China or Italy. Also, this will probably affect foreigners coming into the United States if they want to apply for a life insurance policy. Furthermore, thee could be a 30 day waiting period to apply for life insurance in either of these scenarios.
Please keep in mind that the Coronavirus is evolving and there could be changes to life insurance companies once the Coronavirus has been studied for outcomes.
What are the Symptoms of the Coronavirus Disease?
According to the (WHO)-World Health Organization. The most common symptoms are a dry cough, fever, tiredness, and difficulty breathing in severe cases. Some people may have aches and pains, nasal congestion, runny nose, and a sore throat or diarrhea. These symptoms are usually mild and begin gradually. Some people may be infected but don’t develop any symptoms and don’t feel unwell. Most people (about 80%) recover from the disease without needing special treatment. Around 1 out of 6 people who get COVID-19 becomes seriously ill and has difficulty breathing. Older people and those with underlying problems like high blood pressure, heart problems or diabetes are more likely to develop serious illness. People with fever, cough, and difficulty should seek medical attention. There is no Coronavirus cure. Reference from (WHO) https://www.who.int/emergencies/diseases/novel-coronavirus-2019
This article was written by Mitch Winstead from Advanced Mutual Group. I have been selling Final Expense since 2000. If you would like a quote with no obligations, please complete the quote form by clicking this link https://advancedmutualgroup.com/we-make-it-easy-to-get-life-insurance/or call our office toll-free 1-866-598-8170 or 910-452-1922. Or email us at firstname.lastname@example.org Our website is http://www.advancedmutualgroup.com