What to Know About Life Insurance and the Coronavirus

Life insurance provides a financial safety net for loved ones in the event of an untimely death. It ensures that beneficiaries receive a specified sum, known as a death benefit, which can help cover immediate expenses, ongoing living costs, and long-term financial goals. Public health events, such as a widespread pandemic, often underscore the importance of this protection, prompting many individuals to re-evaluate their coverage needs.

Applying for New Life Insurance Policies

The process of applying for a new life insurance policy involves a thorough assessment by insurers to determine risk and set appropriate premiums. A significant aspect of this assessment is the underwriting process, which evaluates an applicant’s health, lifestyle, and medical history. If an applicant has a history of a recent severe illness, like a significant respiratory infection, insurers will consider factors such as the severity of the illness, any hospitalizations, and the presence of lingering symptoms. For instance, a history of hospitalization due to a severe infection could lead to a delay in the application process.

Medical examinations, traditionally a standard part of the underwriting process, may experience adjustments during public health crises. Some insurers might offer alternative methods, such as telemedicine consultations, or even waive certain in-person requirements for specific policy types. Delays in scheduling or completing exams can occur. Insurers typically incorporate specific health questions on applications to ascertain an applicant’s recent exposure, diagnosis, or treatment for widespread illnesses. Honesty in answering these questions is paramount, as misrepresentation can lead to policy nullification.

Applicants with a recent history of a severe illness, particularly those who experienced significant symptoms or hospitalization, may encounter waiting periods or deferrals. For example, an insurer might postpone an application for a period ranging from 14 to 30 days following recovery from an acute infection. If the illness was severe enough to require hospitalization, the deferral period could extend to 90 days or more. The assessment of risk related to an applicant’s health history can influence the premium rates for new policies, with severe or prolonged illness potentially resulting in higher premiums.

Existing Life Insurance Policy Coverage

Existing life insurance policies typically provide coverage for deaths resulting from a wide range of causes, including illnesses like those associated with global pandemics. Most standard life insurance policies do not contain specific pandemic exclusions, meaning beneficiaries are generally eligible for the death benefit if the policy is active and in good standing.

The contestability period commonly lasts for the first two years after the policy is issued. During this period, if a policyholder dies, the insurer has the right to investigate the claim to ensure that no material misrepresentations were made on the original application. If significant health information was withheld or misrepresented, the insurer may have grounds to deny the claim, even if the death was unrelated to the undisclosed condition.

While pandemic exclusions are rare in modern standard policies, some older or specialized policies might contain specific exclusions. Common exclusions relate to death resulting from illegal activities, engaging in certain high-risk hobbies, or suicide within the initial contestability period. Acts of war or terrorism can also be excluded. The claims process for beneficiaries involves contacting the insurer, completing a claim form, and providing a certified copy of the death certificate. Insurers process claims within 30 days of receiving all necessary documentation, though complex cases can extend this timeframe.

Understanding Policy Features

Life insurance policies offer various features and riders that can provide financial flexibility and protection. A distinction exists between term life and whole life insurance. Term life insurance provides coverage for a specific period, such as 10, 20, or 30 years, and pays a death benefit only if the policyholder dies within that term. This type of policy is generally more affordable and suitable for covering specific financial obligations that will eventually end, like a mortgage or the period when dependents are financially reliant.

Whole life insurance, a form of permanent life insurance, provides coverage for the policyholder’s entire life as long as premiums are paid. Unlike term policies, whole life policies include a cash value component that grows over time on a tax-deferred basis, which can be accessed through withdrawals or loans. While whole life premiums are typically higher, they remain level throughout the policy’s duration, offering lifelong coverage and a savings component.

Accelerated Death Benefit riders, also known as living benefits, allow policyholders to access a portion of their death benefit while still alive under specific circumstances. These circumstances often include a diagnosis of a terminal illness with a life expectancy of 12 to 24 months, or a chronic illness requiring long-term care. The funds received can be used for medical expenses or hospice care, with the accessed amount reducing the death benefit paid to beneficiaries.

A Waiver of Premium rider can prevent a policy from lapsing if the policyholder becomes totally disabled and is unable to work. If the policyholder meets the insurer’s definition of disability, typically after a waiting period of six months, the insurer waives future premium payments, ensuring the policy remains in force. This rider provides a safeguard against unforeseen health challenges that could impact income.

The Guaranteed Insurability rider offers the flexibility to purchase additional coverage at specified future dates or upon certain life events, such as marriage or the birth of a child, without requiring a new medical exam or additional health underwriting. This feature allows individuals to increase their coverage regardless of their health status at the time of exercising the option.