What does coronavirus mean for policies old and new? Should you be considering purchasing a policy? Industry experts Usay Compare are here to explain.
Death, critical illness and lost earnings don’t exactly feature highly for the most pleasant topics of conversation and it’s unsurprising that discussions and planning for such things might get stuck on the back burner. However, the coronavirus pandemic brings times of uncertainty unprecedented in a generation and a sobering awareness of the precious and precarious state of life. Perhaps unsurprisingly, the topic of life insurance and income protection has subsequently been thrust into the spotlight.
Leading industry experts Usay Compare have seen a sharp spike in enquires for life insurance and income protection, alongside, it would be fair to say, a certain amount of confusion surrounding new policies and any exclusions on cover regarding the COVID-19 pandemic. We call on their experts to explain the facts and decode the myths.
Firstly, this is a point worth noting in itself. Call on the experts. Insurance policy wordings are often long, and they vary hugely between providers, therefore it is vital to recruit an impartial company like Usay Compare to do the heavy lifting for you; to get to know you and your specific requirements and ensure that you have the right policy in place and know exactly what you’re covered for should the worst happen.
We’re getting ahead of ourselves though. Firstly, for those who aren’t entirely sure what it is, life insurance is a contract between an individual and an insurance company, whereby the policyholder agrees to regularly pay for the policy and the insurer agrees to pay a predetermined sum, or ongoing payments to the chosen beneficiaries, in the event of the policyholder’s death. The amount they receive depends on the level of cover you decide on and can be directed to cover specific things, such as the mortgage.
Whilst Life Insurance protects upon your death, Income Protection comes in to play if you were to become ill or injured and could not work. Your dependants and yourself would have a monthly payout to rely on, usually around 50-70% of your regular earnings until you can return to work or retire.
Both Life insurance and Income Protection are designed to offer the reassurance that your loved ones will be provided for, if you’re not there, or not able to provide for them. Therefore both are really important for anyone who has individuals who rely on them financially, for example parents, homeowners and business owners. The payout for life insurance or income protection can be used to pay off the mortgage and any debts, replace your income for anyone who relies on it and even provide funding for your children’s higher education.
The two main types of Life Insurance are Term Life Insurance and Permanent Life Insurance. Term Life Insurance is taken out for an agreed term, for example 10, 20 or 30 years, to cover the specific period of time in which it is needed. While you are raising your children perhaps, or paying off your mortgage. It is the most affordable way to buy life insurance, but only pays out if you die during the term of the policy. Most term policies are however convertible to permanent should you wish. Whole of Life is designed to protect funeral costs, inheritance tax liabilities or simply to leave some money to loved ones when you pass.
Regarding existing life insurance policies, assuming the policyholder has disclosed all details truthfully on their application for life insurance, there is no reason to be concerned. Whilst there are usually some exclusions to cause of death, they don’t include any death by illness and on the sad occasion that someone may die as a result of Coronavirus, their nominated beneficiary would receive the death benefit. Some things commonly excluded are more like death by suicide, murder, death under the influence of drugs or alcohol, or by undisclosed habits such as smoking. Existing Income Protection policies are very much the same, insurance companies are unanimously reporting that claims arising from those suffering from COVID-19 should be accepted.
It is still perfectly possible to buy life insurance policies which will cover coronavirus. The important things to consider are that policies will not normally cover existing conditions. So if you already know at the time of applying for the policy that you have contracted the disease, understandably, that will probably be excluded. Premiums are also based upon your health and medical history, so purchasing during a global health crisis could see an impact on policy premiums and acceptance. In terms of Income Protection, some restrictions have been placed around new policies and you may find exclusions that will reject claims arising from cases of COVD-19. it is certainly worth recruiting a company like Usay Compare to ensure that any exclusions are completely understood.
This does go to highlight the importance of Income Protection Insurance, regardless how young, fit and healthy you may be. It also highlights the importance of planning ahead with Life Insurance and Income Protection to mitigate these risks before the problem arises.
That said, it isn’t surprising, when you think about it, that we – as a nation - can put the big conversations of life insurance and income protection to the back of our mind; even convince ourselves we are somewhat invincible. After all; despite our trademark talk about the weather; we are extremely fortunate not to suffer bush fires or hurricanes, earthquakes or volcanoes, famine or drought. Even our standard phrase to illustrate unexpected disaster; to be ‘run over by a bus’ is truly unlikely, with some of the lowest death rates on the roads in the world. This usual distance from our own mortality puts the requirement for a safety net into question.
But if there is one thing coronavirus has taught us, it’s that we are not invincible and events can move fast. A few short weeks ago it would have been difficult to imagine how such a tiny virus could bring our big, modern world as we know it to its knees. Yet here we are.
In accordance with all government guidelines, our expert advisors are working from home in isolation, but they are waiting on the end of the phone to give you all the friendly advice and information you need to consider your options.
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