In the world of life insurance, there’s a saying that sales agents fall back on when they’re trying to explain the importance of a policy to a customer who isn’t getting it. They say that life insurance is like a fire alarm or a fire extinguisher. It’s something that you pay for in the hope that you’ll never, ever have to use it. Spending money on something that we hope we’ll never see the benefit of runs a little contrary to the standard human mindset, but it is true. Right now, thanks to the scary times we’re living in, people who have life and illness insurance policies probably feel a little more reassured about the future than people who don’t.
Without wanting to cause any undue distress, though. We have a question. How many people who currently think that they’re covered by their life or health insurance plans are actually covered for the full extent of the harm that COVID-19 can do? How many people are paying for something in the belief that it will provide financial protection for themselves and their families when, in reality, it’s unlikely to do them any good at all? Unfortunately, we suspect the answer to that question is ‘lots of people.’ We know that thousands of people have the wrong plans, and are living in blissful ignorance of that fact. We don’t want you to be among that number, so we have some important information to share with you.
The most important thing to remember in all of this is that your insurance policy – no matter what type of policy it is – will only pay out if the correct terms appear in your documents. In that respect, you can consider it to be a little bit like an online slots game. You’ll only get a payout from a game on a casino sites UK if the symbols line up for you, and you’ll only get a payout from insurance if the terminology lines up for you. If you don’t know what your policy does and doesn’t cover, you’re taking a gamble with your potential for payouts in the future just as surely as you would be if you were playing online slots. You can take control of the situation, though, so consult the information below and then double-check your paperwork.
Life Insurance Policies
If all you have is a basic life insurance policy, then it will only payout if you die. If you’re lucky (which is the wrong word to use in these circumstances), it might also pay out if you’re very sick and expected to die. That’s all. If you get struck down by COVID-19, and you’re unable to work for weeks or months on end, you won’t get a single dime from a life insurance policy that only pays out upon death. For that reason, you shouldn’t consider yourself to be adequately protected unless you have a lot of savings to fall back on, or if you have a good sick pay scheme available through your place of work. As we already know that most Americans have almost no sick pay whatsoever, a lot more people should probably be concerned about this.
Critical/Serious Illness Cover
Those of you who have a policy that’s designed to pay out on diagnosis of a serious illness probably assume that if you become infected with COVID-19 and end up in hospital on a ventilator, you’re probably covered by your insurer. We’d love to be able to tell you that you’re right, but you still need to look closely at your paperwork. Some insurers will only pay out for specified illnesses, and COVID-19 is only a few months old. If your policy was drawn up before the outbreak began and only pays out for the diagnosis of a specified illness, there’s no way you could be covered for it. You’ll get nothing. You have a better chance of being covered if your policy makes it clear that it will pay out for any respiratory illness requiring hospital treatment – but not many of them do. Remember that insurance companies only make money if they amount they earn in premiums is more than the amount they pay out in claims. If they’re not required to pay out, they won’t. You’re unlikely to get the benefit of the doubt from an insurance underwriter.
Income Protection Cover
Of all the types of general life insurance available (other than private health cover entitling you to medical treatment), income protection cover is the most likely to cover you for any of the effects of COVID-19. Even if your critical or serious illness plan does cover the disease, it will probably only pay out in circumstances that require hospitalization. If you’re stuck at home, too ill to work but not ill enough to need to go to the hospital, you’re likely to get nothing. That’s not the case with an income protection policy. The purpose of policies like these is to provide you with a weekly or monthly (usually monthly) payment for the duration of your illness, regardless of the severity of that illness. The policy wording is generally ambiguous enough to allow payouts to happen even for illnesses that didn’t exist when a policy was drawn up. If you have income protection, then you’re probably better protected than the vast majority of people – but it’s still worth looking again at the small print of your policy to make sure.
No matter which policies you do or don’t have, you may want to conduct a review of your insurance situation to provide yourself and your family with peace of mind during these difficult times. If you do, make sure you get in touch with a qualified professional who can provide a personalized review of your circumstances and a personalized recommendation. All the advice we’ve provided above should be taken as information only and doesn’t constitute a recommendation or advice. Regardless of that, we hope that you’ve found the information useful, and that you now feel you have a better idea of where to look to ensure that your family won’t suffer financially in the event of misfortune or sickness.
