How Covid-19 could affect your life insurance

As Covid-19 continues to claim lives and the numbers keep increasing in the country, many South Africans who previously didn’t have life cover are contemplating the thought. But what are the options and the current situation around life insurance, even if you are insured?

What is life insurance?

Life insurance or life cover is a way of protecting loved ones financially if you were to die. The funds could be used to settle the debt you incurred, or, depending on the amount you were insured for or could afford, could assist your spouse and children with their monthly living expenses and other necessities. 

Will my life insurance pay out if I die because of Covid-19?

If you have an existing life cover policy in place, you will be covered in the event of death as a result of the coronavirus, and the death claim would follow the normal administrative processes. Death claims will be honoured as long as your premiums are paid up and your policy is in good standing, as with any other illness that might end your life prematurely, according to Sanlam and MiWay, for instance.

Insurers, are however, beginning to stipulate exceptions into their new policies regarding death from Covid-19 or related respiratory distress. Some current policies and any in the future may be written with exclusions preventing the insurer from having to pay out if you die as a result of the pandemic or other respiratory conditions during this time, even if you are currently healthy. Find out from your current insurer.

Also read: Why you should buy your domestic worker life insurance

What if I only now want to take out life cover?

Should you not have cover in place, now may be a good time to consider. While life insurance is important during a pandemic or similar situation, you won’t find any insurer that will accept you while you have been positively diagnosed for Covid-19. The uncertainty of the illness, however, isn’t the reason you’re likely to be declined: Even before the current global pandemic, insurers would hesitate or refuse to give a policy to those with pre-existing conditions.

If you are healthy, you will most likely to be able to apply for a policy just as you would before the outbreak and you would be subjected to the normal underwriting guidelines with perhaps a few virus-related questions added. Insurers will carefully look at your current and past health status and if there are things that they deem worrisome, you will likely be denied a policy. Read the fine print before signing any policy.

Deciding on a policy

• When deciding on the type of policy, make a point of checking for any exclusions, such as a pre-existing medical condition. Read the fine print.
• As Covid-19 can result in a lengthy period of illness, check whether your policy includes a temporary disability benefit for an injury or illness which leaves you unable to perform your occupation for a certain period and check whether any waiting periods apply.
• Ensure that the people nominated as beneficiaries on your policy are identified and named clearly. Use the full names and ID numbers of your nominated beneficiaries. Beneficiaries can affect how, when and to whom the claim is paid out. If you have nominated your estate as the beneficiary, the proceeds of the claim will form part of your deceased estate and will be subject to the winding-up process, which could take up to two years to complete. The proceeds of the claim will be paid directly to specific nominated beneficiaries within as short as 48 hours after your demise and are not subject to executor’s fees in the estate.

Also read: The dos and don’ts of life insurance

Age and gender, a compromised immune system, where you live, and if you smoke or not can also affect life insurance premiums. Economic fallout or adverse effects from the influx of deaths may cause insurers to reevaluate their premiums. If you have any underlying risks or problems that come up during underwriting, it will be harder for you to get a policy, or even if your family has a history of chronic illness or other serious diseases. Some policies cover common disorders like epilepsy.

Those with high-risk occupations or bad habits or risk-taking behaviours, like participating in extreme sport, will likely result in a slightly higher premium.

Most life insurers are currently evaluating their policies to make sure that existing and potential clients are appropriately assessed for future risk imposed by this virus.

This article first appeared on Review Online and has been republished with permission.