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Coronavirus: what it means for life insurance, health insurance and income protection

Insurers are changing terms as people scramble to safeguard their income

Coronavirus: what it means for life insurance, health insurance and income protection

Life insurers are restricting cover for new applicants and quizzing them to see if they are showing COVID-19 symptoms.

This cut in insurance that pays out on death comes as travel insurers withdraw or scale back cover and unemployment protection is put on hold.

Here, Which? explains what’s happening to protection insurances that you might need to turn to during the coronavirus crisis.

You can navigate this story using the links below.

How coronavirus is impacting life insurance

Comparethemarket, a comparison website, told Which? it had seen some insurers introduce exclusions on new life insurance policies and applicants were being asked if they had any coronavirus symptoms.

However, prices remain stable and new customers are still being accepted.

If you have life insurance to provide for those left behind after your death, keep paying even if you’re tempted to put it on hold to cut costs.

You could lose your cover if you stop paying your monthly premiums and you’re likely to struggle to find the same level of cover if you start another policy later on.

  • One Which? reader from Leytonstone in London was told by his broker that he was covered for COVID-19, but that it was very likely that many would exempt this from new policies.

Find out more: what is life insurance?

What to do if you’re struggling to pay

If you’re cutting costs or struggling to pay, talk to your provider as soon as you can to see if you can have a payment holiday or reduce your instalments.

Payment holidays are down to the individual insurer’s discretion. Although these have been offered by mortgage providers because of the pandemic, don’t assume the same will apply with life insurance. 

Each insurer differs and the same insurer may vary its stance depending on your circumstances.

Typically, if you don’t pay on time, insurers give you a grace period – before your cover stops.

If you claim for a period when you didn’t pay your monthly premium, often the missing premium must be paid before you can receive the benefit. Some insurers will deduct the premium from the payout rather than insisting they receive the premium first.  

Find out more: check what support is available for renters, homeowners and landlords

How coronavirus is impacting health insurance

With 8,000 beds and nearly 20,000 staff from private hospitals being enlisted to support the national effort in tackling coronavirus from this week, the provision of private healthcare will be impacted. 

Private providers are taking on urgent NHS elective cases to free up the NHS to deal with COVID-19. But as the outbreak develops, their focus is likely to switch to coronavirus patients, too.

The effects on private health will become clearer as events unfold, but private insurers told Which? last week that prices would not be pushed up because of coronavirus. 

In the meantime, private healthcare providers are getting around self-isolation by delivering more care via a mix of phone lines, online and apps.

Both NHS and private patients should expect delays to non-urgent, in-patient elective surgery.

Some services could be still be more readily available privately. Saga suggests that these could include access to drugs and treatments, including breakthrough treatments for cancer, which are often unavailable on the NHS, cancer treatment at home or self-referral for cancer.

Elsewhere, how quickly waiting times are restored to normality is unknown. Some private diagnostics look set to remain available so patients will be ready for treatment once capacity returns.

How individual health insurers are responding

  • Bupa has already started to change the way it’s offering care. It’s now admitting local NHS patients at its Cromwell Hospital in central London. 

Nationally, Bupa is stepping up its mental health support and adding help for COVID-19-induced stress and social isolation. It’s funding phone and video calls with all its consultants, including physiotherapists, and providing digital access to GPs and directly to medical care without having to go through a GP.  

  • Axa PPP is still taking on customers and hasn’t changed its premiums or cover because of COVID-19. 

It will still offer most of its services and is stepping up virtual support on top of existing phone, online and app support for a range of conditions, from musculoskeletal issues to mental health, and for consultations with doctors, nurses, midwives and pharmacists.

Axa policyholders with operations booked in the next four weeks should contact the hospital, as the phasing of workloads with the anticipated rise in coronavirus cases is worked out. CareEach patients will be treated on a case-by-case basis. 

Saga is underwritten by Axa, so much of the above will apply.

Health insurance prices steady for now

Although the Association of British Insurers (ABI) said it did not expect COVID-19 would push up prices, it has yet to be seen what the widespread changes in provision may have on premiums. 

Meanwhile, Aviva confirmed its prices are holding and a price rise due in April was not due to COVID-19.

A 35-year-old with no underlying pre-existing conditions living in a sample postcode could have bought Healthier Solutions for £75.01 a month last March, and it would have cost the same this March following the outbreak. This is for health cover underwritten by Mori and with a £100 excess.

For a similarly healthy 55-year-old in an identical location, the same protection would continue to cost £122.79 a month.

Those with pre-existing conditions, such as asthma, would have to be assessed by each insurer’s underwriters and might be turned down for private health insurance.

Bupa told Which? it was still taking on new health insurance customers and renewing existing customers even for those with underlying health conditions, and had not changed its premiums due to COVID-19.

What should privately insured COVID-19 patients do?

They should turn to NHS 111 and if necessary continue on with the NHS.

All COVID-19 patient management is being led centrally by Public Health England with the NHS leading the response.

Private hospitals don’t include emergency facilities. Policyholders can, however, use their private insurance for advice and support.

Extra money for private policyholders with COVID-19

Private policyholders can get extra money if they’re hospitalised within the NHS, provided they’re admitted in an emergency that would have been treated under their personal policy. The amounts vary among insurers and their policies.

Vitality – a new cashback benefit worth up to £5,000 has been unveiled for VitalityHealth policyholders being treated for the virus in NHS hospitals. Vitality will ramp up a daily £250 after eight days to £500, following research found that, on average, critical care is more likely to be needed after eight days from admission to hospital. 

Saga – the most Saga customers can get is £150 a night up to £3,000 a year under HealthPlan Super. Otherwise, HealthPlan Secure, SaverPlus and Support holders can get up to £2,000 over a year on a £100 nightly rate.

Axa PPP – if an Axa PPP’s policyholder is admitted to an NHS hospital or a private one taken over by the NHS,with COVID-19, Axa PPP would give them an NHS cash benefit typically worth £100-£200 a day (subject to plan conditions). You won’t be able to choose the hospital. However, as most sufferers are likely to be treated outside a hospital, they wouldn’t be covered under their insurance.

Aviva – under cover with Aviva, people with COVID-19 who became in-patients at an NHS hospital would get an NHS cash benefit according to the terms and conditions of their policy. The cash benefit is worth £100 a night for up to 30 nights. This benefit is not available for the first three nights following an accident or emergency admission.

Bupa – provides a cash benefit on some policies.

What’s happening to income protection?

Income protection, which used to be called permanent health insurance, pays out if illness or injury stops you working. It doesn’t cover redundancy, though.

It will pay for one or two years, or until you go back to work, or until retirement or death depending on your policy. The longer the cover, the higher the premiums.

ActiveQuote, the insurance broker used for income protection by five other major price comparison websites (MoneySuperMarket.com, GoCompare.com, Confused.com, uSwitch.com and money.co.uk), said the number of enquiries about income cover had risen by more than 1,000%, doubling each week and spiking on Tuesday 17 March as the numbers of people fearing job loss rocketed.

Comparison website Comparethemarket.com announced on Wednesday 18 March that it was temporarily suspending giving quotes on all forms of income protection, including accident and sickness cover, and unemployment protection.

All insurers have pulled out of providing unemployment cover for new applicants as thousands of workers had been scrambling last week to protect their livelihoods while the COVID-19 pandemic tightens its grip.

Although all insurers have cut unemployment cover, they are still offering accident and sickness cover, although some have imposed restrictions on applicants who have or might have coronavirus and others are considering excluding coronavirus-based claims.

Unemployment cover pulled

All insurers had stopped offering unemployment cover by 19 March, according to ActiveQuote.

There are more than 20 insurers providing income protection, including Aegon, AIG, Aviva, British Friendly, Exeter, Holloway, Legal & General, LV, Vitality, Royal London, Shepherd’s Friendly and Zurich.  

The last broker selling unemployment cover, First Call Group, stopped taking new customers on 19 March. First Call Group is hoping to reinstate cover, but told Which? there were no guarantees as insurers are looking to mitigate their own losses in what is an uncertain market.

ActiveQuote, and the comparison websites it works with, put out a message for Wednesday 18 March that unemployment cover was no longer available, but accident and sickness cover could be found.

Accident and sickness cover still available

Income protection is still available depending on where people shop for it, but is only being offered to cover accidents and sickness. 

Some insurers have started to apply COVID-19-related restrictions to newcomers. Others are still considering what to do.

Temporarily, people can no longer go via Comparethemarket.com for any form of income protection. It could not offer comparisons until the income protection insurers it dealt with had worked out what cover they could offer relating to COVID-19, but Comparethemarket.com could not indicate when this would be.

For the time being, people can still get the other forms of income protection covering accident and sickness, either by going directly to the insurer or via other comparison sites, including MoneySuperMarket.com, GoCompare.com, Confused.com, uSwitch.com and money.co.uk.

Insurers revising income protection policies

Some insurers have already confirmed their position on what they’re offering with their existing income protection.

The Exeter announces restrictions

One of the first income protection insurance firms to reveal changes was The Exeter.

It stopped providing income protection on claims for self-isolation on policies applied for on or after Tuesday 16 March for any claims – whether self-imposed or medically advised.

People who already had an income protection policy with The Exeter before 12 noon on 16 March could still make a claim for COVID-19-related medical self-isolation that followed NHS 111 guidance at that time. Any such payout, it said, was outside its normal terms and conditions.

The decision was posted on its website with half an hour to go before the cut-off point for new customers.

New Vitality customers to wait longer for payout

Vitality told Which? that it was still accepting new customers for income protection as long as they don’t have coronavirus. However, claimants will have to wait at least four weeks until the policy pays out following a claim.

It described this as a small change that would only affect ‘a very small amount of people’. The premium and cover remain unchanged.

People who are showing symptoms of coronavirus, undergoing tests or have tested positive are having their applications postponed.

LV reviewing terms for new applicants

LV said it was still open to new customers seeking income protection. It will pay for a coronavirus diagnosis and will give support to existing customers who are medically advised to self-isolate.

Most customers will recover from COVID-19 within two weeks so LV says it is unlikely to pay for a claim but for those with underlying medical conditions who take longer to recover, payouts will be based on individual circumstances and policy waiting periods. At LV, the shortest wait is one month.

However, it’s reviewing its terms and conditions and this could affect new applications.

Similarly, LV’s life insurance cover is under review, but it said it will pay for any coronavirus-related death claims.

Is protection insurance worth having?

If you’re buying income protection to cover the COVID-19 outbreak, it’s unlikely to payout if you’re ill for a short while or self-isolating, depending on how long the pandemic goes on. 

Most policies, whether bought by an employer or by individuals, are designed for long-term absences, so they won’t kick in until after a waiting period. By then, illness or self-isolation may be over and you could be able to return to work.

Only those policies that provide cover for a short period will pay out, either immediately or after a short time such as a week. They will only pay if you haven’t been able to earn an income in that time, not just because you couldn’t go to work, either because you were self-isolating or ill.

However, it’s looking increasingly difficult to find short-term policies that pay out from day one or after a week as insurers are moving fast to restrict losses they could otherwise face with new customers. 

What to look for before you buy income protection

If you’re hunting for any form of income protection, it’s vital that you understand when and under what conditions it will pay out.

Ordinarily, Which? recommends every adult of working age should consider taking out income protection, as only a small number of employers will support their staff for more than a year if they’re off sick from work.

It usually pays out tax-free between half and seven tenths of your earnings, although there can be a cap. 

It will only pay for as long as the policy lasts or until you can go back to work, whichever happens first.

Payouts are seldom immediate. Some short term policies have paid from the first day, with others there can be a four-week wait, but long-term policies typically don’t start until at least 13 weeks.

While considering protection insurance, you should also take into account the fast-evolving government measures being set out to ease cash flow in response to the economic impact of the pandemic.

Which? advice on coronavirus

Experts from across Which? have put together the advice you need to stay safe and make sure you’re not left out of pocket.

You can keep up to date on our latest advice on the coronavirus outbreak over on our coronavirus advice hub.

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