Life Insurance and Covid-19
Things you need to know and consider
Frequently Asked Questions
If I die from Covid-19, will the insurance company pay the claim to my beneficiary?
Yes, the only exclusion in a life insurance policy is death by suicide during the first two years of the policy.
A policy is contestable for two years. This means that the insurance company has the right to assess if there was a material misrepresentation or fraud when the policy was underwritten. After two years the policy cannot be contested. If there was a misrepresentation or fraud during the first two years and a death occurs, the company has the right to deny a claim. If there is not misrepresentation or fraud, the company will pay the claim. We have had many clients die during the first two years of a policy and in every case, the claim was paid.
If I contracted Covid-19 and recovered, can I still get life insurance?
Yes, as of March 17, 2020, if you are symptomatic, you must wait until you are symptom free for 30-60 days (carrier dependent). After that, if you are otherwise healthy, you can be considered for coverage. This may be subject to change.
If I have traveled to a country that has been restricted by the CDC, can I get still get life insurance?
Yes, as of March 17, 2020, you must wait for at least 30-60 days after your return to the US. After that, if you are otherwise healthy, you can be considered for coverage. This may be subject to change.
Is this a good time to review my life insurance portfolio?
Yes, for two primary reasons. First, things change. Second, in a time of market volatility, life insurance can be a stable alternative asset class. For example, are your children still minors, are you divorced with your ex-spouse as the beneficiary (there was a recent supreme court case where this happened), is the coverage adequate or too much to fund your planning, will your coverage expire before you want it to, is your coverage adequately funded, have you had a change in health? These are all questions that can be addressed in a review.
What if I have a variable universal life policy where the cash value is allocated to sub-accounts in equity investments?
During periods of volatility, it is prudent to review your portfolio. Variable Universal Life Insurance is a long-term asset. A decrease in the account value may represent a buying opportunity when the market stabilizes. We suggest that you consult your investment advisor and us to discuss.
If I want more coverage, how do I get it?
There are two ways, Traditional underwriting and Accelerated underwriting.
Traditional underwriting includes the completion of a written formal application, a medical history interview with a medical paraprofessional, lab studies, a review of attending physician statements and financial justification, and it can take two to six weeks to process.
Accelerated underwriting is new. The application is completed online, the underwriting is completed with a telephone interview and a decision can be made in two to three days. This is generally available for people between the ages of 18 and 60, with a few carriers willing to consider up to age 65. There is no need for a meeting with a medical paraprofessional if the telephone interview is passed. The insurance company reserves the right to move an applicant back to traditional underwriting. Many carriers will issue up to $1,000,000 of coverage and one will issue up to $5,000,000.
What if I no longer want my coverage, can’t afford my coverage and I am thinking about canceling it or cashing it in?
Before you terminate a life insurance policy, it would be prudent to consider having it appraised to determine if an institutional investor would buy it for more than the cash value and less than the death benefit. The institutional life settlement market will buy term insurance, universal life insurance and survivor life insurance. Please contact us before you decide to terminate or surrender a policy to discuss this option.
What happens if I don’t pay the premium by the premium due date?
A life insurance policy has a 30-day grace period. This means that the policy will remain in force for up to 30 days after the due date before lapsing. If the premium is received after the due date, but before the end of the grace period, the coverage will remain in-force until the next due date.
What happens if I die during the grace period before a premium is paid?
The claim will be paid to the beneficiary, less the premium amount due on the due date.
What happens if I miss a premium payment?
It depends on the type of policy. If you miss a premium on a term policy and don’t pay the premiums during the grace period, the policy will lapse. If you miss a premium on a universal life policy with cash value, the policy will remain in-force if there is enough cash value to pay the monthly expenses. If you miss a premium on a whole life policy with cash value and a premium loan provision, the company will borrow the premium from the cash value.
I’m in the last year of my level premium term policy, what should I do if I want to extend my coverage?
There are two choices. First, the coverage can be replaced with a new policy subject to new underwriting requirements. Or, if the policy contains a conversion provision, it can be exchanged for another policy form like a universal life or a whole life policy, with no questions asked. Not all conversion provisions are the same. Some companies only have one policy form available for conversion. Other companies will allow a conversion to any policy available in their current portfolio. This is another good reason for a policy review because this changes frequently.
Does Long Term Care coverage provide benefits for coronavirus?
Yes. Long Term Care Benefits are based on the inability to perform at least two of six activities of daily living (ADLs), no matter what the cause. ADLs include Bathing, Dressing, Transferring, Toileting, Feeding, Ambulation. Benefits are payable after satisfying the elimination period.
If Covid-19 increases mortality in the US, do I need to worry about my insurance company’s financial strength and claims paying ability?
Insurance companies are subject to stringent federal regulations and state regulations on reserving requirements to pay death claims. These regulations make insurance companies the most financially stable institutions in the country, even during a time of pandemic and increased mortality. Greenberg, Wexler & Eig monitors the financial ratings and claims paying ability of the industry landscape.