Covid-19 & life insurance cover
IN UNCERTAIN times it pays to have insurance. Since lockdown began, insurers have experienced an increase in calls from policyholders. Some people are worried about what will happen if they can no longer afford their monthly premiums. Yet despite the pressure on finances, more clients are taking out cover in light of the pandemic, says Schalk Malan, head of BrightRock insurance. We look at six of the most common concerns raised by policyholders
1 CAN I CLAIM AND APPLY FOR COVER DURING LOCKDOWN?
Yes, life insurance is considered an essential service. You can claim or apply directly on the insurance company’s website, telephonically or via a financial adviser.
When you apply for a policy, medical tests are often required. Insurers are postponing these requirements because doctors and nurses currently have their hands full treating Covid-19 cases and aren’t available to do examinations for life insurance purposes. Applications differ between companies but generally work like this:
New applications Assessments are done over the phone but the applicant still needs to provide full medical disclosure. The testing for insurance purposes will take place once laboratories can conduct tests other than for Covid-19.
Existing clients Previous medical information the insurer has on file can be used but this information shouldn’t be older than a year. In general, the insurer will also accept medical information the applicant may have available. Testing will be done when it’s possible.
2 WILL THE DEATH BENEFITS PAY OUT IF I DIE OF COVID-19?
Yes, if a policyholder dies of Covid-19, death benefits will be payable. The normal terms and conditions of the particular policy will apply.
3 CAN I CLAIM FOR LOSS OF INCOME DUE TO THE PANDEMIC?
It depends on the type of policy and the insurer’s terms. Income protection policies If a policyholder is unable to work due to medical reasons, such as Covid-19, these benefits should pay out, says Johan Minnie, managing executive for customer and adviser experience at Liberty.
Disability and critical illness policies Many insurers will cover you for temporary disability if you’re unable to work due to the disease, Malan says. Depending on the criteria, your insurance may cover permanent disability or critical illness claims if you suffer from complications related to Covid-19.
4 WHAT CAN I DO IF I’M STRUGGLING TO PAY MY PREMIUMS?
Contact your insurance company or financial adviser as soon as possible. Most companies now provide premium relief for a specific period – for example until the end of September – and you can apply for a reduced premium during this time.
“If you have a risk policy (policies where the insurer also carries some of the risk of insuring you), you can reduce your benefit cover to any amount between the current amount and the cover equivalent to the minimum allowable premium. If you’ve reduced your benefit cover amount and you do claim during this period, claims will be paid according to the reduced cover amount,” Minnie explains. The benefits of premium relief: Even though the payout is lower if you claim at that time, your premium is also less, which makes it more affordable. You don’t lose your cover. When and if you can afford it again, you can reinstate your original benefit cover.
5 WHAT ABOUT PREMIUM ‘HOLIDAYS’?
Some insurers offer a premium freeze where you don’t have to pay your premium for a certain period. Premium freezes for life insurance don’t work the same way as a premium holiday on your bond repayment, Malan says. If you don’t pay your life insurance premium, you probably won’t have cover – so if something happens to you, your claim could be denied.
6 WHAT IF I STOP PAYING MY PREMIUM WITHOUT LETTING MY INSURER KNOW?
Your policy will lapse. Insurers often provide a grace period, for instance 30 days, in which you can pay the missed premium. But if you don’t, your cover will eventually lapse. Rather contact your insurer and ask for premium relief before this happens. These are some of the consequences when your policy lapses:
You lose your life, disability, critical illness or income protection cover, which means your claims won’t be paid out.
You may later struggle to get cover because you’ll have to reapply from scratch. This means you’ll have to go through full underwriting again – and if the state of your health has changed, you may end up paying more or even find out you’re uninsurable.
It could negatively affect your credit record.