Does Life Insurance Cover Pandemics?

The COVID-19 pandemic has affected many industries across the world, and the insurance industry is no exception. If you have a life insurance policy or are looking to buy one, here's what you need to know at this difficult time.

Current Life Insurance Policies Are Not Affected

As long as a life insurance policy is in good standing and the premiums are current, it doesn't really matter how the policyholder dies. So if a person dies as a result of COVID-19, their beneficiaries will almost certainly receive the policy's death benefit. That is unlike some other types of insurance, such as travel insurance, which may have COVID-19 or pandemic exclusions.

In fact, life insurance claims are rarely denied, according to Steven Weisbart, former chief economist at the Insurance Information Institute, an industry-sponsored group. "When they are," he recently explained on his organization's blog, "it’s typically because the policies had lapsed due to non-payment of premium or the policyholders had provided inaccurate or misleading information at the time of application or renewal."

Dread Disease Riders May Not Apply

If a life insurance policy has a dread disease rider, the rider may or may not pay off if the policyholder contracts COVID-19. These riders provide a portion of the death benefit while the policyholder is still living if they are diagnosed with certain diseases or conditions, such as cancer, kidney failure, stroke, or heart attack. So unless the policy specifically includes viral illnesses such as COVID-19, the rider may be of little use. One exception, however: If COVID-19 causes a medical problem that is covered by the rider, such as organ failure, it's possible that the rider would pay benefits, according to the Society for Human Resource Management.

New Life Insurance Policies Are Still Available

Though some insurance carriers temporarily stopped taking new life insurance applications during the initial stages of the COVID-19 pandemic, most are now accepting them. To comply with local social distancing rules, any medical exam the insurer might have otherwise required may be waived.

In addition to the usual kinds of information you'll need to supply, you can expect to be asked specific pandemic-related questions about your health and travel, such as whether you’ve had, been treated for, or been vaccinated for COVID-19 and whether you’ve been to any high-risk countries or areas.

If you currently have the coronavirus, most insurers will not issue a new life insurance policy until you can prove that you have recovered.

What If Your Insurance Company Goes Broke?

The surge of deaths from COVID-19 will, of course, have an impact on insurance companies' finances. Fortunately, insurers in the U.S. are required by law to keep a certain amount of money in reserve to cover their claims. When an insurer gets into serious financial trouble, the state where it is headquartered may step in (insurance companies are regulated at the state level).

As the National Organization of Life and Health Insurance Guaranty Associations explains, "Even if the company is placed under the control of the insurance department, claims will continue to be honored as long as premiums are paid or cash value exists. The claims will be covered by state guaranty associations, which will either pay them directly or transfer the policies to a financially stable insurance company."

The Bottom Line

Deaths from COVID-19 will be covered by life insurance policies, just like those from other causes. If you need to buy life insurance, it is still possible to obtain it from most insurers.