The coronavirus pandemic has led to a rise in life insurance applications as people worldwide brace to protect themselves and their families from financial fallout. While the fear of contracting COVID-19 is real and natural to want some sense of security, you should only be motivated to buy life insurance if you have a genuine need for life insurance.
There are some important questions to ask yourself before you buy life insurance:
- Will your loved ones experience financial hardship in the event of your death?
- Do you own a home with a spouse or partner based on two incomes?
- Do you have a co-signer on a student loan who will become responsible for the loan if you die?
Having a life insurance policy in place is smart to prevent your loved ones from experiencing a financial fallout. Still, you shouldn’t be motivated by fear of the pandemic to rush out and buy an insurance policy.
There are two basic types of life insurance to choose from, term life insurance and permanent life insurance.
Term life insurance provides coverage for a set period of time, usually 10, 20, or 30 years. Once you reach the end of your term, your coverage expires, and there is no death benefit if you die after your coverage expires. Term life insurance is ideal for policyholders who need coverage for certain stages of life, such as when raising a family or paying off a mortgage. Think of term life insurance as an insurance policy that offers a payout to your beneficiaries if you die.
Permanent life insurance, which includes universal life insurance, variable universal life, and whole life insurance, provides a policyholder with lifetime coverage. Permanent life insurance policies create a savings account where you can earn a minimum interest or a dividend on a tax-deferred “cash value.” As this cash value builds, you can borrow against it to cover things like insurance premiums, inheritance, estate taxes, or cover expenses of a lifelong dependent.
Life insurance gives policy owners peace of mind of financial security, knowing that their loved ones will have some kind of financial protection. Before buying a life insurance policy, it’s important to understand the details of your comparison’s financial products. The type of life insurance coverage, life insurance policy exclusions, pre-existing medical conditions, and premiums all affect the cost of life insurance quotes.
How much life insurance you should take out depends on your budget, circumstances, and lifestyle. Each type of coverage has different premium payments, guarantees, and withdrawal options to consider. iSelect.com.au helps you compare life insurance from a range of life insurance companies so you can find help your family members prepare for the future. From permanent insurance and term life to whole life and universal life, iSelect.com.au is your resource for understanding life insurance policies.
The good news is that if you have an active existing life insurance policy and were to pass away due to COVID-19, your beneficiaries would still receive the death benefit. This holds true if you traveled to a region with a known outbreak of COVID-19; however, if you recently took out a policy and didn’t disclose information about your future travel plans or exposure to the virus, this could affect the policy’s death benefit. It’s also important to note that so long as you pay the premiums of your active life insurance policy on time, your insurance company can’t raise your premiums if your contract COVID-19.
It’s possible to apply for life insurance coverage now, but the approval process may take longer depending on your location and circumstances. It’s advisable to hold off on applying for life insurance coverage if you plan to travel to a country with a high number of COVID-19 cases until after you return.
The insurance company you want to apply with may suspend a new application for up to 30 days if you recently traveled to a country with a high number of COVID-19 cases. The insurer may request a medical exam or statement of good health before processing your application. Even if you do contract COVID-19, you can apply for life insurance coverage. Still, the insurance company will likely postpone making a decision for up to 30 days until you make a full recovery.
Life is full of what-ifs that may or may not be in your control. COVID-19 has changed many aspects of how you go through daily life and the lifestyle that you lead. You may not control how it spreads or why, but you can control a potential financial fallout for your family members with the right life insurance policy.