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The coronavirus pandemic has gone from zero to headline of very major news feed in the span of three months. It has caused nearly every industry to start to evaluate what the impact of the virus is going to be, and it should be of no surprise that the life insurance industry is no different.
The reality is that life insurance companies have a very high degree of exposure for negative impacts to their business from situations caused by the Covid-19 virus.
We have been in contact with several carriers almost daily to get the best information to you as this situation in evolving quickly. Typically, we would write an article that would walk you through the steps of getting burial insurance based off a certain health condition. With the industry finding out new numbers hourly about the virus, this article is going to take a more generalized approach to the topic and cover items that we already have the answers too.
When it comes to the coronavirus and life insurance, lets try to answer some of the more frequent questions we’re already starting to get.
How Are Burial Insurance Companies Responding to Covid-19?
First off, life insurance companies are in the business of measuring risks. They literally pay entire departments that are dedicated to statistics and actuarial data so they can make the most informed decisions on offering insurance coverage. After all, these insurance companies are for profit companies and miss calculating the risk of something could cost them millions. As such, they are closing monitoring the coronavirus situation so they can start to figure out how this will impact new business since the data is changing faster than any one person can keep up with.
In addition to simply trying to figure out the risk of issuing new business, Insurance companies have several different factors having negative consequences. The first being the economic impact of the insurance companies’ investments themselves. When insurance companies bring in money, they in turn invest that money to help cover costs down the road. Now, insurance companies are starting to see the possibility that death payouts could be going up while the value of their accounts is shrinking, creating a double hit.
As mentioned, one piece of the puzzle is the strategy on issuing new policies in this uncertain time, so let’s take a look at a few items on that topic.
Actions Being Take or Considered by Final Expense Companies From the Coronavirus
If you’ve ever read the fine print, the insurance companies can and will add items that are “excluded.” Some insurance carriers we’ve been speaking with have begun adding exclusion riders on newly issued policies. So, even though they’ll issue the life insurance contract, their will be language included that specifically voids them of liability if the cause of death has any relation to the Covid-19 virus.
Below is an example of how that exclusion might show up in the contract:
This Insurance does not cover any claim caused by or related to the following:
• Coronavirus disease (COVID-19)
• Severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2)
• Any mutation or variation of SARS-CoV-2
You could very easily see this become an industry standard if the case fatality rate increases, the rate of spread becomes apparent that it will overrun health systems or carriers begin seeing increased losses that become unsustainable for the business.
Halt on new business
We spoke to one carrier that said they are considering putting in place a temporary hold on issuing any new business.
Again, this action would be put in place for the reasons mentioned before. One item that the person we spoke with choose not to answer was if this would apply to all lines of life business or to specific products. If a company decides to take this action, we assume that based on today’s information (3/21/2020), that they would take this in stages. Most likely they would start by not issuing business to the group of individuals already at higher risk or those who already have a shortened life expectancy. We do not in any way want to sound insensitive, we are simply trying to provide the most realistic scenario of how the insurance company will approach this and it will be done using statistics.
So as an example, elderly citizens who already have conditions such as COPD, heart disease, Lung disease, diabetes or use oxygen currently are at much higher risk according to the CDC. If a carrier typically offers insurance to these individuals, they may choose to limit or stop sales due to the substantially increased risk.
As of today, no insurance company has taken that action, but we have heard from multiple sources that life insurance carriers are saying they’ll consider it if the death rate exceeds certain thresholds.
These halts are usually only temporary such as until the spread it under control through either treatment or prevention.
This is nothing new, life insurance companies have had underwriting rules regarding foreign travel or to certain regions long before this pandemic. This usually includes regions they know are extremely dangerous and as such don’t want to insure someone who has plans to travel there (i.e. Syria or Iraq) in the near future.
Insurance carriers are now withdrawing/delaying applications where applicants expect to travel outside of the USA to places such as China, Italy or other hot spots.
If you have traveled to or plan to travel to a known hot spot, you probably wont be getting approved for a new life insurance policy any time soon.
Can You Still Get Life Insurance During The Covid-19 Pandemic?
Yes, you can absolutely still get life insurance during this time. As always, your general health, preexisting conditions and lifestyle will determine your eligibility.
You also don’t need to wonder about Life insurance rates as they are still the same, even during this unprecedented time. As insurance companies obtain more data, this could be something that might change in the future though. But for now, you won’t pay higher than normal premiums due to the coronavirus.
Can You Get A New Life Insurance Policy If You Have Coronavirus?
Yes and No. If you currently have the coronavirus you, in general you would not be approved a typical life insurance policy with any company (More on that in the next section).
That one type of policy you would still be able to purchase would be a guaranteed issue policy. Guaranteed acceptance is a life insurance policy that basically assumes the worst-case scenario and charges you as if you had extremely serious medical conditions. To put this into perspective on them assuming worst case for your health, they aren’t even going to ask you any questions, none. You could’ve had a heart transplant last week and you could still get this type of policy.
***Guaranteed issue policies all have a 2-3 year waiting period before you’re 100% insured. So, if you were recently diagnosed with Covid-19, took out a policy and then passed away (in that order), your family would not be receiving a full payout. Typically, these policies pay you back all your premiums plus interest (usually 10%). That said, this type of policy could still be a good solution even if you think you might be at risk of passing away within two years… Given that the S&P 500 is down 30% in conjunction with the coronavirus, you’re probably not going to find a spot to park your money right now that offers a 10% return.
So why can’t you get “normal” burial insurance when you have the coronavirus?
On every life insurance application, you’re going to see a question that reads something along the lines of:
In the last 12 months, have you had or been advised to have by a physician any surgery, diagnostic test, hospitalization, treatment or other procedure that has not been done or for which results are not known?
Since there’s such little information on what the outcomes are for someone that is fighting the corona virus, a yes answer to this question would result in a decline. Every company is going to ask something along those lines. Again, they’re measuring risk and they need to know if there’s ANYTHING you’re currently dealing with that might increase the risk of them offering you coverage.
What if you lied on the application and said “no”?
Insurance companies have dealt with this long before the coronavirus, so there is literally no reason to even consider this as a solution to your problem. It will ultimately just lead to more pain for your family because it would provide them with a false sense of financial security and most likely cause them more financial harm than good when it all came to light.
But for those that can’t help themselves…. Let’s just say you have the coronavirus and you apply for life insurance. On the application, you say “No” to the question about pending hospitalizations or other medical treatments. After your policy is issued, you pass away within the first two years of the policy (the reason you pass is irrelevant).
Essentially, the life insurance company will order a copy of all your medical records to validate that you didn’t misrepresent your health when you applied for the insurance. If they find no evidence of misrepresentation, the claim will be paid in full. Or in your case, if they see that you were prescribed all types of antivirals, hospitalized, etc., they will immediately deny the claim since you failed to disclose the information on the application at time of submission.
ALL life insurance contracts (meaning every one of them) have what’s called a contestability clause. This gives the insurance company the right to investigate all claims that occur within the first two years (some states it’s only 1 year) of the policy. We can promise you that with covid-19 creating the problem’s that it is, you can be 100% certain that they will be reviewing medical records for people passing right now and for the foreseeable future.
Will Existing Policies Payout If I Die From The Coronavirus?
Yes any existing life insurance policy will not be affected by a death from the coronavirus.
Life insurance companies are required to have substantial “rainy day funds” in place to cover unexpected claims due to a pandemic or other unusual societal circumstance.
As much as this is creating unforeseen costs, they still plan for situations like this.
Can You Get Life Insurance If You Had the Coronavirus?
If you’ve previously contracted the Covid-19 virus and have since fully recovered, you will likely have no issue obtaining a new life insurance policy but it might be possible that you’ll have to pay a higher premium depending on the level of complications you had when fighting the virus.
Nearly all life insurance applications ask a question such as “In the last 12 months, have you been confined to a hospital?”.
If a question like that appears on an application, it could result in a decline if you said yes or cause you to be back in the situation we mentioned before of either having a higher payment, a waiting period or both.
At the end of they day, if you became ill with the coronavirus and fought it off, you should have no issue getting approved for a new life insurance policy.
How To Find The Best Burial Insurance With Coronavirus
The truth is that you need to lean on an experienced professional agency to help you with this. Everyone wants the best deal, and by best deal, we mean getting the most coverage from day one for the lowest price.
Simplegacy works with 20+ insurance carriers. Not only will we find a company to work with you, we will find multiple. When we do, we can compare rates and impartially recommend whichever carrier will give you the best value. We are not tied to any single company, which gives us the ability to unbiasedly tell you what your best solution is. Since we only work in the Burial/Funeral/Final Expense Insurance category, you will never have to worry about being “cross-sold” or pushed into a solution that doesn’t make sense in the long run for you.
We are here to help you in any way we can. We will use every resource available to us in order to help you find the best policy that will work for you and your family. Our goal is to approach every scenario the way we would if it was our own family that we were planning for.
Call us at 888-519-9119 or fill out the quick quote form for an instant quote.