Published in March 2020
We have recently been getting questions about how a pandemic might affect life & health insurance policies.
Before delving into that, it would be helpful to do a quick review of these insurance policies from a contractual point of view. Life & health insurance policies that are non-cancellable (more on this later) cannot be cancelled or amended in any way by the insurance company, assuming the policy owner maintains the premiums and completed the application truthfully. This is an example of a unilateral contract, where the policy owner could choose to cancel the contract but the insurance company does not have that option. It is also worth noting that insurance companies cannot increase the premium on non-cancellable contracts.
In view of this, an insurance company can NOT add a “pandemic” clause to a non-cancellable, in-force policy to refuse paying insurance benefits for claims relating to a health crisis.
How do you know if your insurance policy is non-cancellable? The policy summary sheet will have information on that, or the individual/institution who sold you the policy will be able to provide the answer. The majority of policies we recommend and implement for our clients are non-cancellable, but not every situation permits going that route; choosing the right policy to apply for is based on medical and financial factors.
No one takes enjoyment in pondering the circumstances of life & health insurance claims, but it is important to feel comfortable with your insurance policies and other estate planning documents. It is important to regularly review your will and other legal documents, as well as beneficiary designations.
For those wanting to pursue life or health insurance solutions, or for any other questions, please contact Jeff Graham at jeff@firstoakfinancial.ca or (604) 363-7549.
DISCLAIMER: this commentary is provided for general informational purposes only and does not constitute financial, insurance, investment, tax, legal or accounting advice.