"You're covered for COVID-19" what this actually means

Many of you will have received an email from your insurer telling you not to worry, you’re covered for COVID-19 under all of your personal risk policies. This has caused a lot of misunderstanding of what this means for your current cover. You need to take this opportunity to brush up on what insurance products you have, and how they would work in the current pandemic and any future events.

That email you got from AIA, Partners Life, or whoever your insurer is, was a mass generic email to all its customers. With people worried about how the pandemic will impact them in different ways it has lead to some reading what they hoped for into that email.

So I will break-down what they mean when they say you’re covered for COVID-19 under each of the three main products, Life, Health and Income Protection.

LIFE INSURANCE
Life Insurance pays a lump sum in the event of premature death of terminal illness. This is the most straight forward product, you don’t really need to know a lot more than that in terms of knowing what would trigger a claim.

Once upon a time most insurers would not have paid out for COVID-19 cases as pandemic was a common standard exclusion. As the email you would have received states that it is no longer an exclusion so a COVID-19 infection resulting in premature death would trigger a claim being paid.

HEALTH INSURANCE
The public system does a really good job in NZ for any urgent medical needs, and ACC can provide cover when Kiwi’s are involved in an accident. For everything else you need Health Insurance, which provides private surgery, cancer care, and even overseas treatments. All Kiwis that have access to and can afford health insurance should have cover not only to protect themselves but to ensure our public system can work as efficiently as possible for those that cannot. Public waiting lists for non-urgent treatment can be long and unpredictable resulting in poor health outcomes for many Kiwis.

That rings true more than ever as access to private health care is needed for many treatments that are not COVID-19 related. For example, the current crisis has seen our health system postpone a wide range of elective surgeries and other treatments.

For any required treatment for COVID-19 where someone is experiencing severe symptoms they would be directed to the emergency department, this is what the public system is designed for. However, if they experienced further COVID-19 health difficulties following the initial infection they may well be covered by their private insurance.

INCOME PROTECTION

This is the one I’ve had the most questions on which is understandable having read the insurers email which suggests you may get covered as a result of the lock-down and/or inability to work.

Your income is highly likely your most valuable asset, much more valuable than your property and yet the number of Kiwis without this cover in place is extremely low but almost everyone insures their house. ACC does a great job supporting people who are involved in accidents, but other major health problems leave many Kiwis vulnerable if they had to fall back on Government income support.

If you contracted COVID-19 and were unable to work as a result of this, you would be covered assuming you meet the eligibility requirements under your cover. Your “waiting period” would be the biggest barrier here, this is the amount of time that needs to pass before your monthly payments would begin. Most policies have a wait period between 4-13 weeks so if you had COVID-19 and recovered, you would likely have recovered before your benefit started paying. If, however, you have subsequent issues as a result and have a more substantial period unable to work, you could see out the waiting period and would be provided some cover.

Many are concerned about the economic impacts, which is why I believe it’s important to state what each product is for. Income Protection is for illness and injury resulting in a long-term inability to work. This is why these products are often called “Disability Income Protection”. Therefore, you’re not covered for not being able to work as a result of the lock-down. If you have a “redundancy benefit” added to your income protection (or as a separate product) and the economic impacts of the pandemic resulted in you becoming redundant there may be some financial relief available.

One of the concerns we have as a nation is the impact on mental health should the lock-down last longer than anticipated. Mental health is already a major reason for claims under income protection and insurers are already preparing for increased future claims.

On that note, take care of yourselves and each other over the coming weeks, and keep in contact with as many friends and loved ones as possible, particularly if they live alone.

This has been quite a long blog post for me and you likely have plenty of unanswered questions, so contact me on pat@liplus.co.nz

Noho ora mai
Stay well, look after yourself, good bye

Pat

#STAYHOME