Life Insurance Claims and COVID-19 | Will Your Claim Be Paid?

COVID-19 Pandemic in Canada

The Coronavirus (COVID-19) pandemic continues to spread around the world with over 1,000,000 infected and more than 50,000 deaths to date. Although Canada appears to be escaping the brunt of the impact, our country is still affected with over 3,000 cases and 30+ deaths as of March 25, 2020.

With numbers rising sharply in some countries such as Italy (~ 75,000 cases / ~7,500 deaths) and America (~70,000 cases / 1,000 deaths), and with no vaccine in place yet, many insurance companies are dealing with the uncertainly of how to deal with this risk.

Wait times on the phone are much higher than usual when you call your insurance company right now, so to help you out, we contacted a number of leading underwriters on your behalf to learn how they are treating COVID-19 insurance claims.

A policy purchased BEFORE COVID-19

If a whole life insurance or term life insurance or any other life insurance policy has been purchased before COVID-19 appeared, which is to say before February-March 2020, a life insurance claim resulting from a COVID-19 death will be treated in the same way as any other death. In the case of a claim, an insurer may conduct a set of standard, obligatory checks to rule out that suicide or any other fraud took place, and, upon successful completion, a claim will be paid to the life insurance policy’s beneficiary or beneficiaries.

A policy purchased DURING COVID-19

First of all, insurers are quire careful now in selling life insurance given the most recent developments and amount of uncertainty associated with COVID-19 and its spread. In general, following rules apply:

  • If an applicant is symptomatic, he/she will not be able to get a policy until a full recovery, and until a pre-defined period of time has passed.

  • If an applicant is asymptomatic, the next question will be around travel plans / history, proximity/exposure to potential COVID-19 carriers and other disclosures

    • E.g. if there are any plans to make a trip to any location which is heavily impacted by COVID-19 (or travel history) such as China, South Korea, or Italy, a life insurance application can be rejected and may be reconsidered in future, such as one month or more after returning from a high-risk destination.

    • If there are no plans to travel to a high-risk destination, an applicant might be able to qualify for a life insurance policy (however, each provider has its own sets of questions for underwriting a policy).

Complying with application questions

If a policyholder has complied with all the questions truthfully in the application, there should be no issues in paying the life insurance claim, even if it originates from COVID-19. In this case, an insurance company will follow its standard claims adjudication process.

Remember, the most critical time defining the success of a life insurance claim is during the application, when the policy is underwritten. It is very important to answer the questions truthfully.

What happens if you do not comply with the application questions?

The situation might look quite different if a policyholder did not comply with the questions in the application and nondisclosed important information.

For example, a life insurance company asked about planned trips to high-risk locations such China, South Korea, or Italy (or travel history) and the answer was that no trips are planned. However, a policyholder later decided to visit a high-risk location (for reasons such as the situation there started appearing more stable and the trip was required for business). Should the life insurance policyholder pass away, the life insurance company can decide to decline the claim.

What about no medical life insurance?

If a policy that was purchased was a no medical life insurance plan, it will be either simplified life insurance or guaranteed life insurance. It is important to understand the difference.

Simplified life insurance comes with a short set of questions and without any medical exams. As long as all the questions are answered truthfully (including ones about health pre-conditions and travel) there should be no issues with a COVID-19 life insurance claim further down the road.

Guaranteed issue life insurance comes without any questionnaires and medical tests BUT with a waiting period. In most cases this waiting period is two years. What this means is it that should a policyholder pass away in the first two years of a guaranteed issue policy being in place, no claim will be paid. In some cases, however, the premium is refunded to the beneficiary.

How to find a life insurance policy now, while the pandemic rages on 

If you are on the search for an affordable life insurance policy in 2020, it is important to consider two things:

  1. Work with a life insurance broker who has access to numerous life insurance companies (ideally 15-20 or more) so they can find you the best option. Many companies treat the current situation differently, but a broker can screen the companies on your behalf and recommend the one most likely to approve your application.

  2. Work with a life insurance broker who is able to serve you remotely, over the phone or online as social / physical distancing is the new normal and you should not be leaving your house to meet a life insurance broker.

Our life insurance brokers have extensive experience serving their clients both in person and remotely. They have been serving Canadians for over 25 years and are very familiar with the many various aspects of life insurance. Interested in a quote or simply have a question? Simply visit our life insurance page and let us know how we can help you. We look forward to hearing from you. Please stay healthy and safe.