Top 5 Questions We Are Being Asked About Life Insurance as a Result of COVID-19

We answer common questions on how COVID-19 has affected life insurance policies and claims.
minute read

Whether you're considering Life Insurance for the first time, or are unsure what cover you have with your current Life Insurance policy, we know there are a lot of unknowns at the moment. The onset of COVID-19 means people are uncertain and concerned about their health and income, and the protection of their families.  

So, we’ve put together the top 5 questions we are being asked each week as a result of the current coronavirus crisis. Hopefully we have answered some of your own questions below.

1. Does Income Protection Insurance cover me if I am laid off from work?

Yes and no. You can’t claim on your policy for being made redundant because of COVID-19; however, some Income Protection Insurance policies do include a feature to waive the income protection premiums for up to 3 months.

‘Repayment Relief’ or ‘Mortgage Option’ can also be purchased as an optional benefit. This is a monthly benefit for up to 3 months to help cover home loan repayments. This can be claimable if you have become involuntarily unemployed for more than 60-90 consecutive days (subject to your insurer’s Product Disclosure Statement).

You may also consider a Premium Pause/Holiday Benefit. This means that you will not have to pay premiums for up to 12 months, although you will also not be covered during this time. It simply means that you can restart your cover within 12 months without having to go through underwriting again. This is a preferred option to cancelling your cover; however, there are better options that help to avoid not having insurance. 

2. Am I covered if I contract COVID-19?

Terminal Illness

As morbid as it sounds, you are most likely covered for terminal illness as there is generally no pandemic exclusion on good-quality Life and Income Protection Insurance policies. Most insurance policies provided as the default cover of a superannuation fund, however, are NOT likely to cover you for COVID-19 as they do have a pandemic exclusion clause. This includes Industry Funds.

Trauma and Critical Illness

Some insurers have a critical care definition in their Trauma Insurance policy, although this is different for every insurer. It is subject to how many days in intensive care you require. As well as this, if a secondary medical condition arises and it meets the current insurer’s Trauma Insurance definitions, you are likely able to claim on that condition 

Income Protection

Yes, you are most likely covered for Income Protection but, like all Income Protection claims, this is subject to the current exclusion definitions on your current policy. You must also meet the Waiting Period requirements due to your policy’s accident and/or injury definitions or sickness.

Total and Permanent Disability (TPD)

You are covered for TPD as a result of COVID-19; however, you will need to meet the TPD definition of whether it is a total disablement that has arisen due to the virus. This means you need to be off work for at least 6 months (TPD owned via Super) or 3 months (TPD personally owned), and unlikely to ever return to your usual occupation.

3. If I am suffering from financial hardship, what are my premium options?

There are multiple options available, based on each case-by-case scenario. In the case of redundancy, premium waivers are offered by some insurers. ‘Premium holidays’ are also an option, but note that by putting your premiums ‘on hold’, you are also without cover during the ‘holiday period’. 

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4. What are the insurers doing to support people during the COVID-19 crisis? 

So far it seems that the majority of insurers are treating each client on a case-by-case basis, but there has been some noise around whether insurers can offer some form of disaster relief discount. For example, a 1-month premium freeze while keeping individuals covered.

The difficulty with this option is that this pandemic definition does not meet the natural disaster definition; however, we’re hopeful that some respite will be offered, perhaps with some government or regulatory intervention. As advisers, we are pressuring our insurers to implement this.

5. Are insurers comfortable taking new insurance applications during the COVID-19 crisis?

The answer is yes, subject to possible altered terms. There is talk about a mandatory travel exclusion that will apply during the pandemic, but whether this applies to soft borders or overseas travel, we are unsure at this stage. There is also talk of a possible blanket COVID-19 exclusion, but this is only a discussion point at this time. Generally, insurers are still providing cover and, in times of uncertainty, applications for Life Insurance tend to increase, which we are experiencing.

More recently, TAL was in the headlines for “excluding COVID-19” for new policies. This has been on a case-by-case basis where applicants have been subject to some heightened level of risk due to travel or their profession. Due to the recent market pressure and the media/public response last week, TAL has reversed this decision.

We hope this insurance information provides some clarity and peace of mind during these times of need. If you do need any further assistance when it comes to your life insurance options, we are genuinely here to help you.

Please get in touch with our BlueRock Life Insurance Specialist to discuss your situation.

Blue Rock Private Wealth Pty Ltd is a Corporate Authorised Representative of BR Advice Pty Ltd (AFSL 488655).


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