Will Life Insurance Pay for COVID-19 Related Death Claims?

At the time of writing this article, COVID-19 has taken many lives: 3.24 million worldwide, 579,000 in the U.S., and 17,658 right here in Massachusetts.

At this point, most of us know somebody who has lost their life to this terrible disease. With all the loss, a lot of families are struggling … both emotionally and financially.

And for many, the financial struggle of the unexpected loss of a family member raises a question: does my loved one’s life insurance policy cover COVID-19 related deaths? Because the virus didn’t exist when many of these life insurance policies were first written, it makes sense to wonder if these types of deaths would be excluded.

At Berry Insurance, we’ve seen a lot of false information out there about this topic and honestly, it’s making us quite concerned. We certainly don’t want to see anybody cancelling their life insurance or not filing a COVID-19 related claim because the internet falsely told them they wouldn’t be covered.

Since we have some Massachusetts life insurance experts here on staff, we thought we would set the record straight.

In this article, we’ll go over what life insurance covers, and explain when it will and won’t cover a COVID-19 related claim.

What does life insurance cover?

Life insurance is an important financial security blanket for many families.

It provides funding to the family of the policyholder if he or she passes away. This funding may be used for funeral costs, debt payments, continuation of the policyholder’s income, college savings for children, and other final expenses.

There are two main types of life insurance: term and permanent. 

Term insurance provides coverage for a certain time period, often 10 to 30 years. If the insured passes away during the term, their beneficiaries receive a death benefit payment, but the policy loses all value once the term ends. 

Permanent insurance offers lifetime coverage including both a death benefit, which is the compensation paid to the beneficiary once the insured passes away, and a cash benefit, which is a savings account available to the insured while he or she is still alive.

To learn more about the differences between term and permanent life insurance, check out this article: Term vs. Permanent Life Insurance: Which is Better for Me?

Both types of policy will pay out after any cause of death with three exceptions: 1. suicide within the first two years of getting the policy, and 2. death while committing a crime 3. Death after misrepresentation on your life insurance application

So are COVID-19 related death claims covered by life insurance? 

As we mentioned above, life insurance covers nearly every cause of death. So yes, if you or someone you know dies from COVID-19 and has a term or permanent life insurance policy, they should be fully covered up to their policy limits.

However, there may be some cases when life insurance doesn’t cover COVID-19 related deaths. The reason these claims could be rejected though have nothing to with COVID-19, and are instead caused by other factors. Here are some scenarios.

When COVID-19 claims might not be covered by life insurance:

Fabricated life insurance applications:

Regardless of the cause of death, if life insurance companies find out the policyholder lied on their application, claims may not be approved.

Fabricating information on a policy, such as lying about underlying conditions, drug use, history of dangerous driving, occupation, extracurricular activities, or more could nullify the life insurance policy.

So theoretically, if a person died from a COVID-19 related cause and the insurance company discovered false information on their application, the claim could be denied.

Certain mental-health related causes:

Unfortunately, COVID-19 related deaths aren’t just limited to direct infection. 

The effects of COVID-19 are turning out to be long-term for many people, and not all of these effects are physical.

Long-term hospitalizations, near-death experiences, isolation, and the loss of certain freedoms and physical capabilities are all products of COVID-19 that could cause a slew of trauma and mental health struggles.

Those struggling with mental health issues following a battle with COVID-19 could turn to dangerous behaviors, or even suicide.

Suicide may not be a directly caused by COVID-19, but indirectly, it is a COVID-19-related death that we are unfortunately seeing happen.

And as we mentioned above, suicide within the first two years is not covered under life insurance. So if a person took their life due to mental health struggles related to COVID-19, they would not be covered by life insurance if their policy is less than two years old. If their policy is more than two years old, they would be covered.

Another potentially uncovered scenario is death from an illegal substance. If those struggling with mental health from COVID-19 turn to illegal substances to cope and the substances cause their death, the insurance company could possibly have grounds to deny the claim, depending on the situation.

If you have an accidental death and dismemberment policy (AD&D) policy

Often, people refer to accidental death and dismemberment policies as life insurance policies, when in fact, this is not a true representation.

AD&D is not a life insurance policy, but instead, supplemental health insurance coverage.

When added on to a health insurance policy, AD&D covers the unintentional death or dismemberment of the policy holder. 

However, unlike life insurance, AD&D usually only covers unlikely events, and will in most cases not cover deaths related to COVID-19 infection.

If you want our opinion? If you have an AD&D policy, it probably isn’t enough. We suggest instead getting an actual life insurance policy.

The right life insurance policy will cover you from COVID-19

As of right now, it seems like we’re past the worst of the COVID-19 pandemic. This last year has taken a lot from us, but fortunately it seems like things are looking up.

But we also don’t blame you if this whole situation left you reflecting on your mortality. If this year taught us anything, it’s that life is fragile, and death doesn’t discriminate.

So where would your family be if something were to happen to you?

If you’re considering that question, it may be the right time to get a life insurance policy, or to contact your insurance agent to make sure you have the right amount of life insurance.