As the COVID-19 pandemic continues to cripple the globe, both health wise and economically, we have been getting questions about how viruses of this magnitude might affect life & health insurance policies, such as critical illness & disability insurance.
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 “COVID-19” clause to a non-cancellable, in-force policy to refuse paying insurance benefits for claims relating to this outbreak. Based on how damaging this pandemic becomes, we may see insurance companies implement clauses in future contracts to protect themselves against a catastrophic virus, but there is no way of knowing at this time how that will unfold. As we tell our clients, the best time to apply for life & health insurance was yesterday, the second best time is today.
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 in harrowing times such as this, it is important to feel comfortable with your insurance policies and other estate planning documents. Use this opportunity to review your will and other legal documents. For those wanting a life or health insurance quote, or for any other questions, I can be reached at firstname.lastname@example.org or 604-761-7543.