Pandemic challenges in Life Insurance

Covid 19 Effect on Life Insurance

With the outbreak of the COVID-19 pandemic last year, there has been a greater emphasis on health insurance plans. People have been consulting with experts or taking social media’s help for better clarity on different aspects of health insurance ranging from their inclusions, exclusions, exceptions, and every relevant information to deal with this unprecedented situation.

Where health insurance helps in paying medical bills, reducing the financial burden of a patient, a Life Insurance policy, on the other hand, offers financial support to the family of the policyholder after his/her demise. Therefore, having a Life Insurance policy during the ongoing pandemic situation is crucial.

But unfortunately, COVID-19 has posed some challenges in buying life insurance policies, especially for new applicants and COVID-19 survivors. That is due to multiple factors such as high policy premium costs, the new restrictions, and longer waiting period for the COVID-19 survivor applicants, and the list goes on.

No Problem for Existing Life Insurance Policyholders

If you are already insured with a life insurance policy then don’t get worried as life insurance covers the demise of the policyholder due to COVID-19. The family of the policyholder is entitled to get the sum insured if he/she succumbs to this deadly disease. However, if COVID-19 is covered under the critical illness rider in a life insurance policy, then its benefits will be paid (or not paid) based on the terms and conditions of the rider.

The major challenge is with the people planning to buy a life insurance policy during the pandemic. Let us deep dive to understand the problems for new applicants including both – COVID-19 infected and Non-infected.

Challenges for Fresh Applicants

As most people are being affected by this contagion virus, the life insurance companies have made it mandatory for the applicants to disclose if they were diagnosed with COVID-19 in the last 3 to 6 months in their application form. It allows life insurance companies to calculate the risk factor involved with the applicant.

Applicants with or without COVID-19 history have to bear the brunt of increased premium prices equally. Life insurance policy premiums are calculated based on the health and medical history of an applicant. But the escalated number of claims due to the pandemic has spurted the premium prices. Currently, life insurance companies are a bit rigid with their scrutinizing process and underwriting to evade the maximum amount of risk.

The companies can reject the applications in case the health and medical condition of the applicant are unfavorable. The insurers have also extended the waiting period for the new policy applicants from one month to three months, depending upon different companies. The life insurance policy allows the family of a new applicant to avail of the policy benefits if the policyholder succumbs to COVID-19 even if he/she was not infected at the time of policy purchase.

Challenges for COVID-19 Survivor Applicants

Applicants with COVID-19 history may face more challenges as compared to the non-infected applications. Along with extra premium payment, a longer waiting period will apply to COVID-19 infected applicants. The waiting period will start from the COVID negative test result date to reduce the risk of life.

While furnishing medical reports, the COVID survivor may have to submit additional medical reports such as diabetes, lung diseases, and other chronic lifestyle diseases that may have been caused due to the side effects of the virus and medication. In case, a survivor has faced comorbidities and increased severity, then insurers can intensify their testing to identify such diseases while issuing new policies. All insurance policies are issued in good faith by the insurers where they believe the information provided by the policyholder to be true. However, if anyone deliberately tries to conceal the COVID-19 history, this may reject the claim.

The sooner, the better.

It is advisable to buy a life insurance policy at an early age to leverage maximum benefits of the plan such as a low premium policy, better benefits, and better chances to secure the lives of family members. However, you can still buy the one before it’s too late.

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