May 15, 2020

What You Need to Know: COVID-19 and your Life Insurance Policy

With all of the uncertainty surrounding the many impacts that COVID-19 is having on our nation, many people are wondering how the pandemic will effect their life insurance coverage?

Life insurance is important protection for many Americans and help us protect our families, and in most cases, the pandemic won’t effect a future death benefit claim on your existing policy. To reassure their customers, insurers like Haven Life have made pertinent information available on their website in a Coronavirus FAQ. The first question they answer?

Q: Does life insurance cover death from a global health crisis like Covid-19?

A: As long as you were honest in the application process about health, travel and pre-existing conditions, yes, term life insurance policies sold by Haven Life cover death from the coronavirus.

The caveat they mention is important. There are three main reasons a death benefit claim may be denied, but they aren’t directly related to coronavirus:

  1. The life insurance application was not accurate
    In cases where the insured passes away within two years of the policy being issued, known as the contestability period, the insurance company will examine the claim along with the initial application. If they find any inaccuracies, errors, or material omissions- pertaining to COVID-19 or otherwise- they will likely deny the claim.
  2. A missed premium payment
    When a premium payment is missed, an insurance company typically gives the policy holder a grace period of 30 days or so (depending on the carrier) but if a payment is not made during that time the policy is lapsed. If the insured passes away before the policy is reinstated any death benefit claim would be denied.
  3. When the coverage has stipulations
    Some types of policies which pay out a death benefit only do so under certain circumstances. These policies are known as Accidental Death and Dismemberment policies, and while they aren’t what most people think of when they think of “life insurance,” we find that many people still mix the two up at times. An AD&D policy only pays out in the event of an accident, and diseases are not covered.

So, rest assured, there is no need to worry about the efficacy of your life insurance during these uncertain times. Another benefit to having a life insurance policy during this likely economic downturn is that a life insurance policy holder can tap the market value of their policy if they need to supplement retirement savings. This option is called a life settlement and it has helped many seniors sell their life insurance policy to a life settlement provider for much more than the insurance company would have given them if they took a cash surrender. In these trying times, it is important to know all of your options. Be sure to reach out to our experts if you have any questions about a life settlement!

Want To Learn More?

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