Fact CheckedThis article was written during COVID – things have changed. We are preparing updated information.
Tons of people are Googling Coronavirus Canada or COVID-19 because this illness changed their lives in a matter of weeks.
We watched with shock and horror as the virus hit China, Iran, Italy…
….and now North America is in its crosshairs. As we scramble to deal with a National quarantine, many of us (myself included) think about our mortality.
Consumers are apprehensive about whether their existing life insurance policy covers them for the coronavirus. What will happen if they buy a new policy today?
Will they be protected if, God forbid, something happens to them due to the Coronavirus?
It’s Not Just a One-Sided Story
Of course, Life insurance companies are worried, too. Can they expect a deluge of claims in the coming months, and how will that affect their solvency? Will the coronavirus pandemic cause a spike in life insurance rates moving forward?
I’ve been fielding many questions recently from clients about Coronavirus Canada and how it affects everything from underwriting to payouts.
So, I’d write a quick blog post to provide some up-to-date information for consumers worried about coverage should they take out a life insurance policy today.
This situation is very fluid, so I’ll do my best to update this article as needed. First things first:
1. Does My Current Life Insurance Policy Cover Me for Death from the Coronavirus in Canada?
In a word, YES! You have nothing to worry about if you had an existing life policy before the pandemic. You’re covered for COVID-19.
What if you purchased a life insurance policy within the last three months? Don’t worry—you’re most likely covered.
Most likely covered? That’s not very reassuring.
Suppose you completed a life insurance application and answered all the questions truthfully. In that case, it’s almost certain any insurer will pay out the death benefit if it’s related to the Coronavirus.
This has nuances, so let’s examine how the life insurance claim process works.
Two-Year Life Insurance Contestability Period
All life insurance contracts in North America are issued with a two-year contestability clause. This is standard practice across the board, regardless of the carrier, country, or type of life insurance. Anytime a claim is made within two years of a policy being issued, insurance companies apply extra scrutiny when investigating the claim.
Does this mean the insurance company won’t pay out the death benefit? Not. If you’ve worked with an experienced broker through the application process and answered all the questions truthfully, the claim will be paid out. It’s just a matter of when.
Ok, so what does that mean?
More information is needed, which takes some time.
When a claim is made within the contestability period, the life insurance company will request Doctor’s records, Provincial or State health records, and your Medical Information Bureau (MIB) file. Acquiring and examining all these files can take many months, thus delaying any payout to your family.
Let’s say, for example, you took out a life insurance policy and then died of a massive heart attack 14 months in. The insurance company will want to see if there’s any record of heart issues in your file that were not disclosed during the application process.
They will review your records with a fine-tooth comb. They will NOT pay out the claim if they find anything indicating nondisclosure or misrepresentation.
Again, this is one reason you want to work with an experienced independent insurance agent who will not step over anything during the application process. This ensures there will be no issues at claims time.
Life Insurance Fact: In Canada, insurance companies pay out 98 – 99% of the life claims they receive yearly.
2. Life Insurance Fraud
The 2-year contestability period is one way insurance companies protect themselves from fraud. It’s hard to believe people lie on life insurance applications, but unfortunately, it happens.
I once completed an application for a client who failed to disclose to me that they had had heart bypass surgery. Of course, the life insurance company discovered this omission during the underwriting process. Fortunately, we could pull the application before it affected the client’s insurability record.
Lying or omitting information on a life insurance application is a bad idea. Insurance companies are smart, and they will catch you. Why jeopardize the safety net you’re creating for your loved ones?
If you are searching for life insurance for Coronavirus Canada and believe you may have it, please don’t leave this information out. It’s fraud, and your family won’t benefit.
3. What if I Want To Buy Life Insurance Today? Will I be Covered for the Coronavirus if I get it in the Future?
Likely, yes, but this is a question that cannot be answered definitively one way or the other. The coronavirus Canada situation is very fluid. As we speak, underwriting guidelines are evolving momentarily, carrier by carrier. Every day brings new announcements and updates. For example, I got an email recently from one of Canada’s largest life insurance companies, Industrial Alliance:
“We wanted to address the risk associated with COVID-19 by revising our declaration of insurability. Rest assured that the new questions to be added on Monday, March 23, will neither affect the client and advisor experience nor the approval rate at the point of sale.”
Post Coronavirus Canada: Life Insurance Screening Questions
Many life insurance companies are introducing additional screening questions to applicants who may be at higher risk. These questions may ask – have you or are you:
- been in contact with or traveled to regions with widespread Coronavirus outbreaks recently? (ie. China, Italy, Iran, South Korea, etc – this list will be expanding as the virus spreads – the US seems to be moving up quickly)
- tested positive for Covid-19?
- recently taken an international cruise?
- experiencing flu-like symptoms, including cough, fever, sore throat, headaches, etc.?
- been in contact with anyone who tested positive for COVID-19?
- been in quarantine?
- planning to travel to any restricted areas soon?
Waiting Period
Answering “yes” to any of these questions could result in your policy being issued with a waiting period, a postponement, or a possible decline.
“Lincoln Financial Group on Monday imposed a 30-day waiting period before issuing policies to most applicants who have travelled to those regions”
Exclusion for Coronavirus
If the situation worsens, Canadian Life Insurance Companies may add exclusion riders to all new policies.
That means your new policy will come with a Coronavirus Exclusion Rider or amendment when it arrives.
If you die from contracting the Coronavirus (COVID-19), your life insurance may not cover you. Death due to complications arising from any illness that you contracted because of the Coronavirus also may not be covered.
My life insurance insiders tell me that this is very unlikely to happen.
Life Insurance Medical Exams: Delays and Cancellations
Depending on your age and the amount of coverage you’re applying for, you may be required to undergo a life insurance health exam. This is also known as a paramedical.
A nurse or health practitioner visits you at home or work to test your blood, urine, and vitals at no cost. The insurance company uses the results of these tests and the information on your application to assess your insurability. Insurers also pay for tests carried out by third-party providers like Dynacare and ExamOne.
Due to quarantines and self-isolation, most paramedical service providers in Canada have suspended their activities until further notice. Insurers cannot correctly process all life insurance applications without these test results.
Some paramedical providers, like ExamOne, continue to administer life insurance health exams only once they’ve prescreened the applicant for possible exposure to COVID-19. This is to minimize the risk to their nurse practitioners.
Life Insurance Companies Relaxing Application Rules
In response, some traditional insurers relax their underwriting standards so consumers can apply for coverage without a medical exam. As of March 20th, if you’re 50 years or younger, Industrial Alliance allows you to apply for up to $1 million of term coverage WITHOUT A MEDICAL EXAM.
Likewise, Manulife has always offered an option where healthy individuals can apply for up to $1 million of term coverage without a nurse visit. There are exceptions.
Many other carriers are now following suit. As of April 8th, 2020, the following life insurance companies have waived underwriting requirements of blood/urine, etc, for policies up to $1 Million:
- Canada Life (to age 50)
- Empire Life (to age 50)
- Equitable Life (to age 50)
- Humania (to age 50)
- Industrial Alliance (to age 50)
- Ivari ($750k to age 50)
- Manulife (to age 55)
- RBC Life Insurance (to age 55)
- Sun Life (to age 50)
- SSQ ($750k to age 45)
- Wawanesa Life (to age 50)
NOTE* If you’re over 55 or have moderate insurability issues, you may not be eligible for no-medical life insurance with these carriers.
Some Good News: You Can Still Purchase No Exam Life Insurance
Within the past ten years, one of the fastest-growing sectors in the Canadian insurance space has been the No Medical Life Insurance Niche. These policies are ideal for consumers with moderate to serious health issues who, under normal circumstances, would be rated or declined by traditional insurers.
They are also a viable option for healthy people in a hurry who don’t want to bother with the hassle of taking a life insurance health exam. These are legitimate policies with standard guarantees. To qualify, you need to answer about 30 specific health questions. Once approved, a policy can be issued within 72 hours or less. An application can be completed with an agent over the phone from the comfort of your home.
The cost of no-medical life insurance in Canada has become very competitive in the past few years. Canada Protection Plan, one of the leading providers, offers up to $750,000 of term coverage to healthy individuals up to 50. Consumers with moderate health issues are eligible for up to $500,000 of term coverage up to age 70 without undergoing medical tests.
Coronavirus Canada: Will Insurers Stop Accepting Applications
Let’s take a step back and try to put this into perspective. This pandemic is undoubtedly serious, and there are many unknowns. So far, it seems to be most devastating to our elderly population and those who have underlying health conditions.
Some data suggests men are dying at double the rate of women. But it’s too early to say definitively. We can agree on this – with the scarcity of data around the coronavirus outbreak, scientists and policymakers have no consensus about the best action.
Life insurance companies don’t deal well with this type of uncertainty, and depending on how the coronavirus Canada pandemic progresses, some insiders believe they may stop taking applications altogether.
COVID-19: A Life Insurance Wake-Up Call?
This type of health crisis occurs only once in a generation or two. But does it take a pandemic to make people realize how important life insurance is to protect families from financial ruin? Realistically, the chances you or I will die from COVID-19 are minimal. Many other factors pose a much higher risk.
For those who have existing policies, now is an excellent time to review them to ensure your current needs are met. Most importantly, review your beneficiary designations to ensure they’re up to date and in line with your wishes. Changing or adding a beneficiary is easy. You fill out and sign a form from your insurance company.
If you don’t have any life insurance, now may be an excellent time to begin putting some coverage in place. If you’re 55 or under, many traditional carriers will underwrite you without medical tests. There are also many simplified issue options that allow you to get life insurance within a few days. Given the fluidity of the situation with paramedical providers suspending service and short-staffed life insurance carriers, this may be a good option.
You can apply for a full, medically underwritten policy when things settle down.
“I’m vulnerable and I’m in that target age, and I knew I had to get this end-of-life stuff done,” she said. “This has put me face-to-face with my responsibility and what I need to do to make things easier for my son should anything bad happen.”
Coronavirus Canada: The Big Question: If I Get the Covid-19, Will I Be Covered?
Okay, you’re putting me on the spot at a tough time. Things change daily, but I’ll go out on a limb and give it my best guess. Remember that I’m not an insurance underwriter; this is my opinion as an independent life insurance agent.
If You Already Have an Existing Life Insurance Policy
If you have an active life insurance policy and are up to date with your premiums, sleep well at night, and you’re covered!
The insurance company cannot cancel the policy because of any change in your health or a recent trip you may have made overseas. If you decide now to travel to a country with a COVID-19 advisory and succumb to the pandemic, the insurance company cannot deny your family’s claim.
If You Apply For Life Insurance During the Pandemic
Let’s say you apply for life insurance today. You go through the application process and answer all the questions truthfully and to the best of your ability. This means answering “no” to any new, preliminary questions about unrestricted travel, contact, or experiencing flu-like coronavirus symptoms.
The insurance company vets you. Congratulations, your life insurance application is successful. The policy is issued at standard rates, your first premium is drawn, and your coverage begins immediately.
Four months from now, God forbid, you contract the coronavirus and die as a result. I believe most life insurers will pay your family the full death benefit.
However, if you were to pass away from a COVID-19-related condition within a few weeks of taking out a new policy, all bets are off. I can’t say for sure whether most carriers would pay out the claim or not.
Call Policy Architects Today For Some Honest to Goodness Advice
I’m like you—I have a family, and I fall into the “higher risk” category for Coronavirus Canada. Safety is paramount to me, and business has taken second place.
An event like this is difficult to comment on because it is changeable by nature. So, I am hesitant to offer any absolutes.
If you are looking for life insurance coverage, I recommend applying for a traditional term policy if you are in good health and age 55 or under. A no-medical product may be better if you have moderate to serious medical issues.
Life insurance companies have the resources to weather storms, so don’t count them out.
“life insurance companies are generally stable and well-capitalized, unlike those in many other industries”
While the coronavirus sucks, the good news is we are all in this together. Hanging on to our communities, friends, and family is essential during this difficult time.
If you have any life insurance questions or want to chat about my thoughts regarding the coronavirus in Canada, don’t hesitate to reach out. james@policyarchitects.com
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