The last six months have been dominated by the devastating impact of coronavirus. By 27th October 2020, more than 45,000 people in the UK had lost their lives to Covid-19 with more than 890,000 people having tested positive for the virus.
Of course, it’s not just in the UK where the virus has had an impact. There have been more than 1.1 million deaths globally, with more than 43 million cases of the virus across the world.
In recent months thousands of families across the country have lost loved ones as a result of the pandemic. But with the disease being relatively new, will life insurance providers pay out for a death from Covid-19? Here’s everything you need to know.
Life insurance providers will normally pay out of you die from Covid-19
Losing a loved one is a stressful and emotional time. However, if they have life insurance in place, you know that there will be financial support available to you during this difficult period. A tax-free lump sum means there’s one less thing to worry about.
The UK’s leading insurers have all confirmed that, if someone holds a life insurance policy and they pass away due to coronavirus, they will pay out if the claim meets the terms and conditions of the policy.
This normally means that the premiums for the cover will need to be up to date, and that the policyholder was honest when answering the underwriting questions on the application. For example, if they did not mention pre-existing conditions or other issues during the application process, the insurer may not pay the claim.
Insurers paid £90 million in Covid-19 life insurance claims between March and May 2020
Figures published in the Telegraph demonstrate that life insurers have been paying out life insurance claims due to coronavirus.
According to the Association of British Insurers (ABI), life insurance providers paid out £90 million between the start of March and end of May 2020 - the equivalent of £980,000 every day.
According to the ABI, 7,000 claims were made during the height of the pandemic, representing just 18% of all coronavirus-related deaths. However, the trade body says that all claims made were accepted.
The average payout on term insurance, which is a policy that pays out if you die within a fixed period, stood at £63,000. 95% of all claims were made under individual policies such as term assurance.
Individuals with ‘group’ life insurance policies, which companies generally buy to provide life cover for employees, received an average payout of £137,000. Just 5% of claims between March and May were made under such a group scheme.
The percentage of life insurance claims paid is generally extremely high
It is certainly reassuring to learn that insurers paid every claim for a coronavirus-related death between March and May 2020.
However, this high claims payout rate is actually a feature of the UK life insurance sector. Figures from the Association of British Insurers (ABI) consistently show that providers have an exceptional record when it comes to paying life insurance, Critical Illness and income protection claims.
In 2019, insurers paid out more than £5.7 billion in protection claims, equivalent to 98.3% of all claims. This is the highest percentage of claims paid on record. This includes more than £3 billion in life insurance claims, equivalent to almost £16 million paid every single day.
In 2019, the claims payment figures are:
- Term life insurance – 97.4% of claims paid with an average value of £77,535
- Whole of life insurance – 99.99% of claims paid with an average value of £3,465
Why would an insurer not pay a life insurance claim?
While more than 97% of term life insurance claims were paid in 2019, why would an insurer not pay out on a life insurance policy when the policyholder passes away?
The three most common reasons are:
- The policy has lapsed. If the policyholder has not kept up with the premiums, the policy could have lapsed in line with the terms and conditions.
- The policyholder was not honest when completing the proposal form, or they had missed off important information. This is known as ‘misrepresentation’. An example would be if you were a smoker, but you said that you did not smoke on the proposal form.
- A specific definition in a policy’s terms and conditions was not met. An example would be a life insurance claim for suicide within the first 12 months of a policy (as many policies exclude this).
What about Critical Illness and Covid-19? Will my policy pay out?
Critical Illness cover is designed to pay out a tax-free lump sum if you are diagnosed with a serious illness covered under the policy. Examples include serious cancers, heart attack, and multiple sclerosis.
As far as the UK’s leading insurers are concerned, coronavirus is not covered under a Critical Illness policy. You therefore would generally not be able to claim for coronavirus under a Critical Illness policy.
However, if you experience complications from Covid-19 that lead to conditions that are included in your policy – such as kidney, liver, heart or respiratory failure – a claim will typically be paid, if it meets the definition in the policy terms and conditions. Some policies will also pay out if the policyholder has been in intensive care for an extended period and required ventilation.
Speak to an expert to avoid being scammed
If you’re thinking of putting life insurance in place, be warned that there has been a rise in scams surrounding insurance in 2020.
The Telegraph reports that an increase in the number of people enquiring about life insurance ‘has spurred a wave of cold callers preying on the fears of the elderly by using the coronavirus pandemic to sell life insurance’.
If you want to make sure you have the right cover in place, it pays to speak to an expert. We are highly experienced in helping customers find the right life insurance, and we work closely with some of the UK’s leading providers to ensure you never pay more than you have to, and that your cover is provided by a trustworthy and established insurer.
Make sure you have the right life insurance and Critical Illness cover in place
Putting the right life insurance and Critical Illness protection in place gives you the peace of mind that financial support will be available when you or your loved ones need it.
Insurers are currently accepting new business, and so there’s no need to delay in getting the right cover.
Note that many of the UK’s major insurers have change their application process by including questions about Covid-19.
Companies such as Aviva, Legal & General, Royal London, and Zurich are now asking potential customers questions such as whether you have tested positive for the virus, whether you have experienced symptoms, or been in contact with someone diagnosed with it. Be prepared to answer some of these questions as part of the application process.
If you need help in getting the right cover for you, please get in touch. We have strong relationships with the UK’s major insurers and can get you the cover you need at a price you will love. Indeed, we intentionally take a lower commission than the standard rate, so that you get a discount on your premium.
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