Life Insurance and COVID-19

By Forrest Private Wealth

COVID-19 has been a shocking event in many ways. It’s clearly a highly dangerous virus for those over 70 and those with existing health conditions. There have also been cases of people who are both relatively young and healthy becoming seriously ill and sadly succumbing to the virus. This current situation more than ever lends itself to the consideration of life insurance.

Most people understand life insurance to be important. Equally, it’s one of the tick box items people procrastinate with the most. Until faced with a life experience that increases its priority.

With this in mind we’ve shared our thoughts on life insurance, both in terms of its relevance, as well as any impact COVID-19 might be having on life insurance and existing policies themselves.

Life Insurance and COVID-19

What are we talking about when we say Life Insurance?

Life insurance offerings include 4 basic types of cover:

  • Life Insurance: provides a lump sum payment in the event of death and is designed to protect your family.
  • Total and Permanent Disablement (TPD) Insurance: provides a lump sum payment if you become totally and permanently disabled. It is designed to help cover rehabilitation costs, repayment of debts, and the cost of living for you and your family.
  • Trauma Insurance: provides a lump sum payment in the event you suffer a medical trauma that impacts your life and lifestyle. This might include things like a stroke, heart attack, loss of limbs etc.
  • Income Protection (IP) Insurance: provides a payment up to 75% of your salary for a period if you’re temporarily unable to work due to sickness or injury.
Why is Life Insurance so important?

First and foremost, it provides protection for you and your family. It means the people who matter most in your life may be protected from financial hardship if the unexpected happens.

Importantly, it also reduces stress during difficult times. As has been illustrated by COVID-19, none of us know what lies around the corner. We are all currently living through this tragic event and having insurance cover in place means there is just one less thing you have to worry about.

Unforeseen tragedies such as illness, injury or permanent disability, even death – can occur. Even if COVID-19 was not a current issue, most of us might know someone who has been struck down with serious injury, illness or even death well before their time.

With the right insurance in place, you or your family’s financial stress may be further reduced, and you can focus on recovery and rebuilding your lives.

Finally, insurance cover can be part of the legacy you leave behind. A lump sum death benefit can secure the financial future for your children and protect their standard of living.

What do we do?

At Forrest Private Wealth, using a unique proprietary software, we complete an interactive interview with our clients taking into consideration their unique needs, wants and the ultimate outcome they are seeking in the event the unexpected happens. Scenario outcomes are easily understood, leaving clients with the peace of mind knowing that in the event of death or disability they are fully versed on how they are covered.

Importantly, where possible, using current death benefit pension and taxation rules, precise levels of life insurance, beneficiary allocation and family income is maximised at a tax efficient level.  And as part of regular check ins, this analysis is re-evaluated to ensure amounts are in line with changing circumstances or differing outcomes.

Whilst this conversation can be uncomfortable, it is far better had than not, and the potential devasting financial impact that can result.

Click on our insurance philosophy to find out more.

COVID-19 and insurance

The COVID-19 pandemic has raised many questions on insurance. The following Q&As provide guidance on many of the common queries.

What has been the impact of the Coronavirus(COVID-19) on Retail Insurance?

For the retail life insurers that we work with there is no meaningful impact as it relates to COVID-19. For existing clients, there are no exclusion clauses around pandemics and the like that would affect any valid claim. This is not necessarily the case, however, with some group life insurance policies (typically offered by a Super Fund) and direct life insurance policy offerings (typically available online or from TV), where there appear to be some potential exclusions. One key difference here is that the life insurers we work with all offer guaranteed renewable contracts, which means that once you have cover in place with these insurers, the contract cannot be changed in any way to your detriment.

What if I have or were to get COVID-19?

Having COVID-19 in itself is not a claimable event, BUT if it led to your death or complications that gave rise to a claimable event or conditions across TPD, Trauma, and IP, then any valid claim would be paid for any client that already has cover in place. The one key thing to note is that if you are about to commence a new application with one of our approved insurers there may be some underwriting questions in relation to COVID-19. It is important to note that if you have been diagnosed with COVID-19, or you are in mandatory self-isolation, you will likely not get cover until you have been completely cleared of the virus. Please discuss this with your adviser if you are in this position.

Are our approved insurers financially strong and able to pay claims given market volatility and a likely recession?

The Australian Prudential Regulatory Authority (APRA) requires that insurers have capital in place to pay claims that can support a 1 in 250-year event. All of our approved insurers have capital at between 150%-250% of these mandated levels by APRA, giving us great confidence in the capacity of our insurers to pay claims both now and over the longer term. This in turn should give you greater piece of mind.

COVID-19 and Existing Policies

Are there any exclusions on my policy for COVID-19?

So long as your cover was in place prior to the declaration of the COVID-19 pandemic (generally 20th February 2020) you are covered in the event that COVID-19 leads to a claim.

Cover under group life policies may include pandemic exclusions and will be dependent on your policy statement.

Can I make a life insurance claim for a death related to COVID-19?

While COVID-19 in itself is not an insurable event, death caused by it would be covered.

My income has stopped or been cut substantially because of COVID-19. Is there anything my insurer has on offer to minimise the impact of premiums on my family and I in the coming months?

At this stage, most insurers are working with reinsurers to deliver clients alternatives to cancelling their cover. Some of the options available from some insurers for people experiencing hardship because of job loss include the following:

  • Suspending Cover / Premium Pause
    Some insurers can pause premiums for up to 12 months on request from the insured. During this time coverage stops. At the conclusion of the pause (which can be ended earlier), cover restarts without any need for a health / employment declaration.
  • Waiver of Premiums While Involuntarily Unemployed
    Some insurers can waive premiums for up to 3 months if the insured person becomes involuntarily unemployed with coverage retained during this time.
  • Transfer of Ownership
    Some insurers give clients the option to transfer ownership from non-super to super. Some will allow this process online while others will require that clients call their adviser to arrange the change.

Please contact our office if you are considering cancelling or reducing your cover or otherwise suffering financial hardship. Often there are options available such as above that provide premium relief. These will vary between insurers and be on a case-by-case basis.

Can I make a COVID-19 related claim for TPD, Income Protection or Trauma?

COVID-19 is not excluded however you still need to meet the terms and conditions of your policy. As an example; if you hold income protection with a 4 week or 30-day waiting period, are diagnosed with the virus and become unable to work for 3 weeks; no claim would be payable. If your sickness were to extend for another 3 weeks (6-week total illness) then you would be able to claim for 2 weeks benefit. For policies with longer wait periods current evidence suggests that recovery is likely well before then.

What happens when applying for more cover?

All the major retail insurers have applied additional COVID-19 underwriting questions to new applications which take into account recent travel as well as potential exposure to others that may have been exposed. If unwell, the insurer will decline cover until you are given a clean bill of health from your doctor. We believe blanket COVID-19 exclusions may be brought in for cover increases and where new cover is taken out as well as where cover that has lapsed (is reinstated) while the current pandemic remains.

Can I make a claim for Income Protection relating to COVID-19 for having to be away from work either because of self-isolation or because I have received medical advice not to attend work, even though I haven’t been diagnosed with this illness?

No, self-isolation or medical advice to stay away from work as a precaution to your health does not qualify you for an income protection claim.

Does Income Protection insure against redundancy/loss of job?

Although policies vary somewhat the answer is generally going to be no, or at least they don’t cover it in any useful way. Income Protection is designed to cover you in the event of illness or accident.

I think I’ve received a suspicious email relating to COVID-19. What should I do?

It is important to be aware of numerous online security scams that are targeting people at this vulnerable time. High-profile events like the coronavirus are almost inevitably exploited by cyber criminals to spread malicious files, conduct scams via email and phone and often play on justified concerns.

If you have any questions you can contact Scamwatch, which has a dedicated page on the coronavirus – or Stay Smart Online for more information on ways you can protect yourself.

I have COVID-19. Can I get cover or increase my existing cover?

No, your application will be deferred until given a clean bill of health form your doctor.

I haven’t been diagnosed with COVID-19 but have been in contact with someone diagnosed with it. Can I get cover?

Your application will be deferred for the required timeframe to provide medical clearance confirming you do not have COVID-19.

In all cases, where you have a query or concern, please contact our office to speak to us.


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