It is virtually impossible to not be aware that COVID-19 virus has had a huge impact on pretty much all aspects of everyday life. From working patterns, travelling plans and socialising, wherever you are in the world, there is a high level of uncertainty. Here’s what you should know about COVID-19 and the effects it is having on insurance.

Unsurprisingly, this pandemic is causing a burden on many businesses and the insurance industry is no exception. Some insurers have started taking action to protect their businesses whilst others are being forced to act as result of the governments emergency response to the virus. Insurers’ reputations are being put on the line as customers discover that many basic policies do not cover the impact of a global pandemic and proceed to publicly express their apprehension. The situation partially comes down to customers not fully understanding their insurance coverage and what COVID-19 means for their existing polices. It is true also that the age of indifference when it comes to financial matters is well and truly over for now.

If you have income protection or life insurance, like many clients, you likely have questions around what scenarios you will or won’t be covered for. While it’s always best for you to review your Product Disclosure Statement (PDS) and talk directly to your provider or adviser, here are some of the key facts and scenarios uncovered.

Group cover versus retail, the differences and how they may impact on your ability to claim;

The first point of to consider when looking into your policy to start to understand what is and isn’t covered is determining if your policy is a retail policy; meaning fully medically and financially underwritten or whether it is an automatic acceptance (group insurance) policy built into a superannuation fund and it ‘unitised’ and not medically or financially underwritten.

The PDS (Product Disclosure Statement) on a fully underwritten policy does not change and your contract with the insurer relates to your PDS at the time your policy was taken out. Whatever you are covered for remains in place so long as you pay the premiums. A group cover policy has more of a rolling PDS and the terms of cover can (and frequently are) changed but it is designed to be more affordable and in some instances is the only cover that some clients with medical or occupational challenges can be eligible for. This is of particular importance when you have questions relating to Covid-19 and how your policies could potentially cover you. Group cover is particularly confusing for a lot of clients due to the evolving nature of them; for example a client may have $300,000 in life cover and then reach an age where this drops down to $175,000 or $0, leaving clients confused as to what happened to the cover they thought they had. Legislation also last year brought in under the protecting your superannuation package meant that clients under 25 or with low balances had to ‘opt in’ to keep cover otherwise it was automatically cancelled.

An example is that Qsuper last year changed their income protection for members from a 3-year benefit to 2 years to address affordability of premiums for members.
QSuper has also announced a pandemic illness exclusion to new insurance policies that have been put in place on or after the 18th March 2020. QSuper will not pay an insurance benefit where your claim arises from pandemic illness.

Other insurance companies, such as MLC have released statements reassuring customers that there will be no specific exclusions for COVID-19 in their insurance policies that would affect the way they assess their claims. MLC have dedicated a page specifically for information regarding to their response to the COVID-19 pandemic and what it means for MLC life insurance policies. For more information, visit the MLC website.

Mortgage protection insurance (making sure you check before you refinance debts)

Some clients will have been sold ‘mortgage protection cover’ when taking out their home loans. These policies are usually quite costly and may include benefits such as paying out a loan in the event of death or disablement. Some cover involuntary unemployment (unlike income protection) so it’s a good idea to contact your lender and see if you have loan protection.

At times where interest rates are low, it can be tempting to move banks for a better rate but in doing so, the loan protection policy would cease. It is linked to the loan facility. Make sure you look into this when refinancing as it may not be apparent that you would lose this policy at the time of refinancing.

Will Income Protection cover me if I am stood down/made redundant and am injured or become ill while unemployed.

Income protection policies provide coverage if you are unable to work due to sickness or injury in line with the terms and conditions of the policy and depending upon the waiting period selected. The policy does not pay benefits if you’re told you cannot go to work as your workplace has shut down.

However, if you become ill or are injured while not working or are made redundant and have a retail policy, chances are that you will be able to claim on income protection. The actual means used to determine your ‘pre-disability’ income will be covered in the PDS and ranges from 12 months to an average of the last three years to the best of the past three years income up to the monthly insured benefit amount. This means if you were diagnosed with a condition where you cannot work for a period of time or are injured, you can apply to claim on income protection. This means you should not cancel this cover for a period of unemployment.

What to do if you are struggling with cash flow to pay premiums.

Insurance is important but these days makes up a large portion of our spending and when cash flow is tight the need to reduce spending is making many people re-think their budgets and discretionary spending habits. If you are suddenly finding your insurance unaffordable, there are things you can do to reduce the impact on your personal cash flow before cancelling policies. You should seek advice about this though as changes may lead to unintended consequences to the policy.

Life, TPD and Income Protection can be funded from superannuation in Australia. Trauma or Crisis insurance cannot. Potentially, you may be able to transfer policies funded directly to be paid for through your super fund and avoid cancelling them however some features cannot be retained such as ‘agreed value’ income protection or ‘own occupation’ TPD.

It is also a good time to review the amount of insurance you have and whether it is still needed. An adviser can assist you with this and see if there is a more affordable policy and an opportunity to save on premiums. Insurance premiums can creep upwards in cost each year and it’s not until you really look into it do you realise how much you are spending. Level premiums can help curb these increases by locking in a price with only CPI increases each year.

I’m in lockdown but don’t have Coronavirus, can I claim income protection?

Income protection insurance is generally designed to help you in the case of an illness or injury, and hence it is unlikely that it will cover you in the instance you find yourself stuck at home and unable to work.

A spokesman from NobleOak, a life insurance company, commented that income protection insurance pays up to 75% of your pre-tax income for a certain time period in the case where you are unable to work due to total or partial disability. You are usually required to have been unable to work for a period of between 30-90 days before your claim is paid, depending on the specific waiting period you chose for your cover. In the case you are absent from work due to self isolation or office closure, but you have not received medical advice to stop work, you will not be classified as disabled and hence will not be eligible to claim on an income protection policy. However, depending on your employer, you may have to use annual leave to cover your time off instead. If you are a casual worker and do not have annual leave, then you may be eligible to apply for some financial assistance from your bank or government.

I’ve contracted Coronavirus and complications mean I’ll be out of work for 30+ days, can I claim?

If coronavirus and other health complications have inhibited your ability to work after your insurance waiting period is up then you may be eligible to claim income protection cover.

A life insurer, Zurich, made a statement in regards to COVID-19, explaining that income secure cover should apply in this scenario. However, it should be stressed that you will need to have already had an income protection policy in place before you became sick in order to make a claim. When you can claim will depend on the waiting period you opted for at the time you took out the policy.

With all insurance policies you should read the product disclosure statement, so you are aware of what you are and are not covered for.

I have life insurance, will my family be able to claim if I pass away from Coronavirus?

If you have a life insurance policy in place prior to contracting the virus, your family should be able to make a claim, given the life insurer has not added a pandemic exclusion.
Multiple insurers within Australia have released online statements outlining what their guidelines are concerning Coronavirus related claims. If you haven’t heard or seen any public announcement from your insurer, it is worth giving them a call to see what their stance is on this issue.

MLC, the life insurance company, released a statement reassuring clients that there are no exclusions specifically relating to COVID-19 that will affect the way they assess claims.
NobleOak also released a statement explaining there is no current pandemic exclusions in their insurance policies and they have no intention of introducing a COVID-19 exclusion.

I don’t have life insurance yet, can my family make a claim if I get it now and then pass away from Coronavirus?

If you don’t currently have a life insurance policy, you should still be covered if you take out a policy prior to contracting coronavirus. It is important to note that if you have a pre-existing health condition you may not be able to get life insurance however in the case that you do, you may be charged a higher premium. Smoking or being over a certain age before you take out the policy may also cause higher premiums.

In the instance where you are applying for life insurance now, after the outbreak of COVID-19, some insurers may require you to answer questions relating to your previous or near future travel plans.