Life insurance and Covid-19 – what you need to know as claims hit £200 million

As the UK death toll from coronavirus rises beyond 127,000, it’s been a devastating year of loss. Millions of families across the country have been impacted by the illness, either losing a loved one or battling the virus themselves.

Now, new figures from the Association of British Insurers (ABI) paint a picture of the total cost of life insurance payouts in the UK for Covid-19.

Read on to find out just how important life insurance payouts have been to families across the UK, and everything you need to know about life insurance and Covid-19.

 

More than £200 million paid in Covid-19 life insurance claims in 2020

New figures from the ABI reveal the total value of life insurance claims due to Covid-19 in the UK in 2020. 

According to the ABI figures, there were 11,198 claims received under individual and group life insurance policies. Of these, 10,205 were individual policies (whole or life, term insurance and Critical Illness claims) with 993 claims on group life insurance schemes.

In 2020, a total of £202 million was paid out throughout the year, with a claims success rate of 96% of individual and 99% of group claims. The ABI said that remaining valid claims “are being processed as quickly as possible.”

The average payout on individual policies was £13,100, while group policy payouts averaged £74,600. The almost 11,200 payouts included £250,000 made the day after notification of death and a £1 million payment to dependants.

The ABI states that this is the first instance of it collecting life insurance payout data from a single event, reflecting the “unprecedented pandemic.”

Yvonne Braun, the ABI's director of long-term savings and protection, said: “No one will have been affected by the pandemic more than the families of those who have tragically died due to Covid. 

“While no amount of money can ever replace a life, insurers have and continue to do everything they possibly can to help families cope financially through these distressing and worrying times.”

 

Total insurance cost for the UK likely to reach £2.5 billion

It’s not just products such as life insurance and Critical Illness cover that have see insurers pay out significant sums in recent months.

Across all insurance products, including business interruption and travel insurance, ABI members expect to pay up to £2.5 billion for Covid-19 insurance claims incurred in 2020.

Commenting on these figures, Craig Paterson, chief underwriter at Royal London, said: “Despite 2020 being an unpredictable year, we continued to pay claims promptly and support our customers. 

“The pandemic has shown the importance of having protection in place and we have paid £13.1 million in Covid-19 related claims.”

 

Insurers have an excellent record in paying claims

Considering the excellent claims payment rate of UK insurers, it’s perhaps no surprise that they have paid the vast majority of claims as a result of Covid-19.

The most recent figures, from 2019, show that insurers paid 98.3% of all claims – the highest percentage on record. More than £5.7 billion was paid in claims, including more than £3 billion in life insurance claims. That is equivalent to almost £16 million paid every single day.

In 2019, the claims payment figures were:

• Term life insurance – 97.4% of claims were paid with an average value of £77,535
• Whole of life insurance – 99.99% of claims were paid with an average value of £3,465
• Critical Illness cover – 91.6% of claims were paid with an average value of 67,573.

Will my life insurance pay out for Covid-19?

Yes. All the leading insurers in the UK have confirmed that, if you have life insurance in place and pass away due to Covid-19, they will pay the claim if all the other terms and conditions of the policy are met. This normally means that:

• Your premiums must be up to date
• You answered the underwriting questions accurately on your life insurance application.

This means, assuming you were honest on your life insurance application and have paid your premiums, you have the peace of mind that your beneficiaries should receive a lump sum if you were do pass away because of coronavirus. 

 

Why would an insurer not pay a Covid-19 claim?

As above, there are two reasons why an insurer might not pay a life insurance claim if you passed away from Covid-19:

1. The policy had lapsed because you did not keep up with the premiums.
2. You did not answer the underwriting questions on the application form honestly and accurately. For example, you may have not revealed that you had specific ailments or symptoms, or you were a smoker but you said that you did not smoke on the proposal form.

When it comes to making a Critical Illness cover claim because of Covid-19, things can become a little more complicated.

Insurers will not typically consider Covid-19 a “critical illness” under the terms of the policy. So, a claim for Covid-19 would not normally be accepted.

However, if you experience complications from Covid-19 that lead to conditions that are covered under your Critical Illness policy – such as kidney, liver, heart or respiratory failure – your insurer may well pay a claim, if it meets the definition in the policy terms and conditions. 

Some Critical Illness cover policies will also pay out if you have been in intensive care for an extended period and required ventilation.

 

Can I get life insurance if I’ve had Covid-19?

Yes. Indeed, it is possible to get life insurance if you have previously been diagnosed with a range of conditions.

The important point to note here is that you must be honest and accurate when completing the application form for the cover. As we saw above, if you don’t disclose symptoms or previous medical conditions, this could invalidate your policy when a claim is made.

So, you will have to disclose that you have had Covid-19 on your proposal form and outline the severity (or otherwise) of your symptoms. Common questions that you might encounter on the application form include:

• Have you tested positive for coronavirus?
• Have you had any symptoms of coronavirus?
• Have you been in direct contact with anyone who has been diagnosed or suspected of having a coronavirus?

If you answer “yes” to some of these questions, a decision regarding your cover may be delayed until you have recovered. The decisions may vary from insurer to insurer.

 

Does having the Covid-19 vaccine affect my life insurance?

No. Indeed, the Association for British Insurers has been clear to point out that having the Covid-19 vaccine won’t affect your cover.

A statement on the ABI website says:

“There are some claims being made that having the Covid-19 vaccine will impact your life insurance cover. This is false. Receiving a vaccination against Covid-19 will not impact your insurance cover, be it life insurance, private medical insurance or other forms of insurance.”

 

Get the right life insurance and Critical Illness cover for you

We specialise in arranging life insurance for people with a range of medical conditions. Our experts have helped many clients with pre-existing medical conditions to get the protection they need, so we are well-placed to help you if you’ve had Covid-19 or other medical issues in the past.

Read more about your particular condition on our website or speak to one of our experienced consultants in confidence.