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Does my life insurance cover me for coronavirus?

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When the coronavirus first started to grab mainstream attention, many Australians were shocked - and disappointed - to learn that their travel insurance excluded pandemics.

It's no surprise then that so many people have been wondering whether they can still count on their life insurance policy to pay out for coronavirus-related claims.

Will income protection pay out if I'm hospitalised because of COVID-19? Will redundancy cover help if I lose my job? Will my family still get a benefit if I die?

coronavirus life insurance

They're all scary questions that people didn't anticipate. Thankfully, life insurance policies don't have a pandemic exclusion and, generally, they'll still pay out for coronavirus-related claims.

However, while this news can offer some comfort to Aussies with life insurance, there are a few important details that shouldn't be overlooked.

If you have life (death) cover

If you have life insurance which promises to pay a benefit to your family when you die, your policy will be largely unaffected by coronavirus. If you're one of the unfortunate Australians to die of COVID-19, your family will still receive a benefit.

The Financial Services Council (FSC) confirmed this in March when it released a statement soon after the coronavirus outbreak was recognised as a global pandemic.

"There are no exclusions in existing life insurance policies that would prevent the policy paying out for a death claim related to coronavirus, if you follow government travel advice," the FSC says.

However, the statement includes an important detail: life insurance benefits may be dependent on people following government travel advice.

If you're planning on travelling overseas, make sure to check the terms and exclusions of your life insurance policy. Some life insurers won't pay out if you travel to a dangerous country and die while you're there. With the worldwide "do not travel" advice still in place, this could apply to any overseas travel.

If you have income protection insurance

Lots of people have found themselves out of work due to coronavirus, either because they were forced into isolation, temporarily stood down by their employer or even made redundant.

However, while there are no pandemic exclusions in income protection policies, a benefit will only be paid in certain limited circumstances.

If you get sick due to COVID-19, you'll technically be able to claim, but only if you've passed the waiting period set out in your policy. Usually, you won't be able to set a waiting period of fewer than 14 days. This means that if you get sick, you have to be off work for at least two weeks before you can make a claim. The majority of people who fall ill with COVID-19 recover within two weeks.

If you were forced into isolation or temporarily stood down by your employer, income protection insurance can't help in this situation.

If you were made redundant, and have the redundancy add-on for your income protection policy, you may be able to make a claim. However, there's also a waiting period for redundancy cover - usually a minimum of 28 days - so you won't be able to claim for at least 28 days after you lose your job.

Also, if you do collect a redundancy benefit from your income protection policy, you won't be able to claim any welfare payments from the government.

If you're thinking about getting life insurance

If you don't have life insurance or income protection insurance, you can still get a policy, and coronavirus-related claims will be covered. Even if you're a healthcare worker in a high-risk environment, you can still get life insurance that covers COVID-19.

However, while income protection policies are still available, most insurers have stopped offering the redundancy add-on.

We're cutting through the confusion to help you manage your money during the coronavirus outbreak. Click here for more on how COVID-19 could affect your job, budget, super and investments.

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Nicola Middlemiss is a senior insurance writer at Finder.
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