How does Coronavirus (COVID-19) affect Life Insurance policies?
Updated 1st December 2021
The novel coronavirus, or COVID-19 as it is commonly known, has to date infected over 260 million people worldwide and been responsible for over 5 million deaths.
Insurance Watch has received many enquiries from policyholders wondering:
- whether their Life insurance policy covers death from COVID-19
- whether getting a COVID-19 vaccine will affect their policy
- whether TPD, Trauma or Income Protection policies provide any coverage for COVID-19
- how hard it will be to take out a new policy or change cover in the current environment
We answer some of the most frequently asked questions below.
Do existing Life insurance policies cover Coronavirus (COVID-19)?
The short answer is “Yes”.
The insurers listed below have released statements confirming that there are no general exclusions for pandemics such as COVID-19 in their life insurance policies:
The Financial Services Council has also released a statement confirming that its members have “no exclusions in their existing life insurance policies as at 11 March 2020 that would prevent the policy paying out for a death claim related to coronavirus, if you follow Government travel advice”.
The reference to travel advice in this statement recognises that some policies issued direct to the public (as opposed to the policies purchased through life insurance brokers like Insurance Watch) may require that you have complied with Australian Government DFAT travel warnings in order to have coverage.
If you have a COVID-19 vaccine will you be covered?
The short answer again is “Yes”.
There is some misleading and ill-founded information floating around on social media platforms suggesting the contrary. The argument seems to go that the COVID-19 vaccines are considered “experimental medical treatment” therefore if you choose to get vaccinated you are making a personal choice and this will invoke the exclusions in policies against self-inflicted injury. Therefore if there are any side effects from the vaccine you will not be covered.
This scaremongering has been roundly condemned and the Financial Services Council representing the life insurance industry has stated that: “There have been false claims that having the COVID-19 vaccine will impact your life insurance cover. This is not true. To be clear, receiving a vaccination against COVID-19 will not affect any application you make to take out life insurance or any claim you make on life insurance you already have.”
Eight of Australia’s largest Life Insurers have also provided a joint statement on COVID vaccines to reassure Australians that they will be covered. The statement clarifies that having an approved COVID-19 vaccine will not affect your ability to claim on an existing life insurance policy, nor will it affect your ability to take out life insurance, and you will continue to be covered should you suffer from any serious side effects.
What coverage for COVID-19 is provided by Life and TPD insurance policies?
Subject to the terms and conditions of a policy being met, coverage is broadly:
Life insurance – a lump sum could be payable if COVID-19 resulted in your death or a terminal illness.
Total and Permanent Disablement (TPD) insurance – if your health was permanently impaired by COVID-19 and as a result you were unable to work again in any occupation you are suited to by training, experience or education (“any occupation” TPD) or your regular occupation (“own occupation” TPD) a lump sum payment could be payable.
Accidental death or Accidental TPD insurance – under these policies there would be no cover provided for death or disablement resulting from COVID-19. This because COVID-19 is an illness and does not meet the definition of an accident.
Is COVID-19 covered by Trauma insurance policies?
Under a Trauma or Critical Illness insurance policy a lump sum benefit is paid if you suffer one of the specified medical conditions under the policy. Unfortunately neither COVID-19 nor coronavirus are medical conditions listed under current trauma policies.
However, some trauma insurance policies do include an intensive care benefit. As COVID-19 can result in an intensive care admission with continuous mechanical ventilation required for more than 10 days, a claim may be possible if your policy includes this benefit and the policy conditions are met. MLC revealed in May 2021 that it had paid several claims under this benefit.
Our free online comparison service can help you to compare the benefits offered by different trauma policies and view the detailed definition of each benefit in the insurance company’s Product Disclosure Statement.
Is COVID-19 covered by Income Protection policies?
If you are diagnosed with COVID-19 and, as a result of this, are unwell and unable to work for longer than the waiting period under your income protection policy you could be paid a monthly benefit while you are under medical care and unable to work.
However, you will generally not be covered by income protection policies if COVID-19 causes you to be unable to work due to –
- Having to self-isolate
- Your business having to close down (if you are self-employed)
- Your workplace being locked down (if you are employed)
Does Income Protection cover redundancy caused by COVID-19?
Redundancy generally means that your loss of employment is both involuntary and final, i.e. it is not a temporary stand down.
Most income protection policies do not provide cover for redundancy, although some policies offer a premium waiver if you are involuntarily unemployed.
Some older OnePath and CommInsure income protection policies offer some repayment relief for ANZ and CBA loans in the event of involuntary unemployment. If you have one of these policies and have lost your job as a result of COVID-19 you should enquire about your eligibility.
Another option for homeowners concerned about job loss is AIA Repayment Relief which can be taken out with Life and/or TPD insurance cover. Under this option you can be paid a benefit equal to your monthly home loan repayment if you are made redundant, provided the cover has been in force for a minimum of six months.
What assistance will Life insurance companies provide to those experiencing financial hardship?
Insurers recognized that COVID-19 had a severe economic impact on many policyholders. As a result, in 2020 there were a number of measures introduced to help those suffering financial hardship to maintain their policies. While many of these specific programs have now expired, if you are suffering financial hardship it is worth seeing if your insurer can offer some relief.
Some of the options available are:
- Grace periods
- Premium Waivers or Discounts
- Policy Suspension
- Policy Reduction with Reinstatement
- Other Policy Alterations
For those struggling to make payments, it may be comforting to know that insurers provide a grace period of at least 30 days (and in some cases up to 60 days) before they will lapse your policy due to non-payment.
As long as payment is received within the grace period the policy can usually be continued without an interruption in cover. Even if a policy does lapse, there could be a period during which the policy can be reinstated, although some health questions may need to be answered.
Premium Waivers or Discounts
Some insurers will take into account a policyholder’s individual circumstances and how long they have held their policy in determining what assistance they can offer.
Support may be provided via a flexible premium payment plan, waiving premiums for a period of time or providing a discounted premium.
Suspension of policy/Premium holiday
In recognition of the difficult circumstances created by COVID-19, many insurers introduced in 2020 the ability for policyholders to suspend their policies for a period of time varying from 3 to 12 months.
During the period of suspension no premiums are payable but there is also no cover, including for any condition which becomes apparent during the suspension period. Also some insurers will limit cover to accident only for the first 3 months when TPD and income protection policies are resumed.
Some policies automatically include the option for suspension so it is worth checking. Suspension is preferable to cancelling a policy, particularly one which has been in place a long time. Resumption of the cover is easy, in most cases without health underwriting. This compares to the long forms and underwriting required to take out a new policy.
Policy Reduction with Reinstatement
Similar to the policy suspension option above, some insurers allow a temporary reduction in cover, along with a corresponding reduction in premiums. Cover may be automatically reinstated to the higher level at the end of the agreed period without having to reapply.
The advantage of this option is that there is still some amount of cover during the reduction period, although admittedly at a lower level.
Other Policy Alterations
If your policies have been in place for a long period of time, COVID-19 may prompt a review to see whether there is still a need for the same level of cover, or can this be reduced. Our Life insurance needs calculator can assist with this or you can Get Advice from one of our advisers.
There are also changes to other cover options which can reduce cost. For example, increasing the waiting period of an income protection policy from 14 to 30 days can reduce premiums by up to 40%.
Does Coronavirus make it harder to take out a new Life insurance policy?
From March 2020 Insurance Watch has observed changes in the way that insurers assess applications for new policies.
In most cases this has resulted in a tightening of requirements, or the introduction of new underwriting criteria such as:
- No more instant acceptance of online applications – all applications are being reviewed by underwriters before being accepted
- Additional questions about recent travel – questions are being asked regarding recent trips overseas to assess potential exposure to Coronavirus.
- Additional questions about travel intentions – if you intend to travel outside of Australia in the short term cover is unlikely to be offered. Any longer term travel plans will be considered on an individual basis and an exclusion may be applied.
- Additional questions about current work status – this is particularly the case for income protection applications, with casual or contract employees now less likely to be able to obtain cover
- Additional questions about health – questions regarding any flu-like symptoms suffered, any testing or diagnosis of Coronavirus.
- Those with auto-immune diseases or chronic conditions who are more susceptible to COVID-19 may find that cover is harder to obtain or is declined.
Can I get insurance cover if I have been diagnosed with COVID-19?
If you have been diagnosed with COVID-19 or you have flu-like symptoms, insurers have indicated their approach will be to defer providing cover until testing has been done and a clean bill of health given.
Can I get cover for COVID-19 if I am a frontline health services worker e.g. a doctor or nurse?
In late March 2020 concerns were raised by an ABC news report that doctors and nurses working on the front line in hospitals and emergency services may be refused insurance cover because of their higher exposure to COVID-19.
Occupational duties and work environment are always considered as part of an insurer’s assessment of an application. However, the extent to which this may limit access to cover varies according to each insurer’s underwriting criteria.
In order to provide certainty to frontline healthcare workers, the Financial Services Council announced on 6th April 2020 a commitment by its members to provide the following minimum levels of cover without any exclusions or loadings for COVID-19:
- $750,000 Death cover
- $500,000 TPD cover
- $200,00 Trauma/Critical illness cover
- $4,000 monthly Income Protection benefit
However this initiative expired on 1st January 2021. As the amounts of cover available and the costs can vary significantly from insurer to insurer it is important to Compare Quotes.
If you work in a medical field with potential exposure to COVID-19 we can help you understand how you might be affected if you provide details of your situation at Get Advice.
Will management of my claim be affected due to COVID-19?
Insurers have given assurances that they have plans in place to ensure that during COVID-19 lockdowns claims will continue to be managed with minimum delays. Where possible insurers will deliver support though tele-health services.
Insurers have also indicated they will be flexible around medical evidence requirements for ongoing claims. They recognize that there may be strains on medical services which may make it difficult to obtain doctor reports. This will be factored into claim payments.
Have other questions about COVID-19?
Please do not hesitate to contact us if you have a query about how COVID-19 affects your policy. With high levels of consumer uncertainty and constantly changing circumstances there has never been a better time to Get Advice.
Please note: the above information relates only to the insurance companies and policies compared on this website. Policies issued direct to the public (direct life insurance) or taken out via a superannuation fund may have additional limits, exclusions or terms and conditions. The information provided is general in nature and does not consider your personal circumstances. To obtain advice on your situation please go to Get Advice.