- Date : 26/03/2021
- Read: 5 mins
In case of death due to COVID-19, how are life insurance plans decided regarding the claims made?
With more than 2.7 million deaths worldwide till mid- March 2021, COVID-19 continues to extinguish the lives of thousands of people every day. Along with awareness about health and hygiene, the coronavirus pandemic has raised consciousness among people about the need for health and life insurance.
The insurance coverage of any policy is subject to the terms and conditions mentioned in the policy document. When it comes to our health insurance, does our existing policy automatically cover a new disease? If not, we should find out what additional or new policy we should opt to prepare for a rampant disease. Similarly, it is important to know if life insurance plans cover COVID-19.
Life insurance plans and COVID-19 coverage
If an individual succumbs to death due to COVID-19, their nominee will be eligible for the sum assured under any existing life policy that the deceased had. It will be regarded as a health-related death and as such, the nominee or beneficiary nominee can proceed with the insurance claim. Such a claim can be made for any life insurance policy, including term insurance.
Exclusions – Notably, life insurance policies specify particular types of deaths that are not covered under the benefits of life insurance. Such exclusions may include murder, suicide, death due to dangerous activities etc. A coronavirus led death, on the other hand, is a health problem and doesn’t fall under any exclusion.
Claims – In case an existing policyholder dies as a result of COVID-19, the death benefit will be paid as per the nominee declaration made by the deceased at the time of policy purchase. The surviving nominee will have to verify the policy document while presenting the death certificate and making a life insurance claim.
Critical illness – If the life insurance plan comes with a critical illness rider, the terms and conditions of the rider and their applicability concerning a COVID-19 death needs to be found out. If COVID-19 itself is included in such a critical illness list, there may be conditions attached to it. For instance, insurers may require the policyholder to adhere to recognised medical advice in case of a critical ailment. Failure to do so may result in the rejection of death claim benefits. Similarly, critical illness benefit may not be available if the COVID-19 death occurs directly or indirectly due to a listed critical illness. However, this is applicable only if the insured death occurs within 30 days of diagnosis and affects the critical benefit, not the basic sum assured.
Life insurance in times of corona
Those who don’t have an existing life insurance policy need to understand the implications of the pandemic on insurance policies. They would also find out that the virus may influence the life insurance company’s stance on the acceptance or rejection of fresh policy applications.
Premium cost – Apart from the acceptance or rejection of a policy application, new life insurance premiums may see an escalation as well. A pandemic puts an additional cost and increases the risk of a claim for the insurers. Increasing the premium would make financial sense to this change in the scenario. However, if the vaccines demonstrate good efficacy and the herd immunity is complete, things can truly return to normal.
Health condition – If you are buying a life insurance policy, you may have to undergo a health examination and the insurer may analyse your medical history as well. Any existence or history of coronavirus would have an impact on the insurer’s decision on the policy application. The existence of the comorbidities susceptible to COVID-19 would, similarly, influence the acceptance and premium calculation. This includes conditions like hypertension, diabetes, cardiac, liver, and kidney problems etc.
Coronavirus infection – If someone buys a new life insurance plan now but dies due to a COVID infection later, the nominee will be eligible for the death benefit payment. However, the same wouldn’t be true if the policyholder is found to have been infected from COVID at the time of purchase of the policy.
In any case, a new policy buyer should read through the terms and conditions of the policy carefully before purchasing it.
Types of life insurance and COVID-19 suitability
There are different types of life insurance plans offered in India. Although broadly designed to provide life cover, these plans also serve other purposes. A unit-linked insurance plan is a good investment opportunity, while a retirement plan is ideal for post-retirement income flow. Endowment plans and children’s plans help you accumulate savings, while money-back plans provide periodic incomes.
An insurance policy purchased to cover the risk of COVID-19 will, first and foremost, focus on the life cover. And when it comes to pure risk coverage, a life insurance term plan or a whole life insurance plan are the ones to opt for. The difference between the two is that term life insurance offers life cover for a specific period, but a whole life plan (as the name suggests) is for one’s entire life.
To sum up, coverage of a COVID-19 death is not under much doubt for existing life insurance policies. In the case of new policies, the policy buyer may have to look deeper into aspects like the premium cost, impact of critical illnesses, and previous or existing coronavirus infection. If you don’t have a life cover yet, the pandemic should serve as a timely reminder for you about the importance of life insurance. It will protect the surviving family from any financial difficulty that may arise due to the sudden demise of a person from COVID-19. Things to note when purchasing health insurance during COVID-19 pandemic.