Coronavirus shutdown: key must-knows relating to income protection and life insurance

By Tara McCabe ·

With the Coronavirus (COVID-19) declared a global pandemic by the World Health Organisation and the situation evolving daily in Australia, now is the time to do some important prep work.

If you’ve got income protection or life insurance, you’ve probably got some questions around what scenarios you will or won’t be covered for. While it’s always best for you to review your PDS and talk directly to your provider, here are some of the key facts we’ve uncovered.

I’m in lockdown but don’t have Coronavirus, can I claim income protection?

It is not likely that income protection insurance will cover you should you find yourself stuck at home and unable to work.

Generally speaking, income protection insurance is designed to help you if you develop a long term illness or become injured or permanently disabled.

A spokesperson from life insurance company NobleOak commented that income protection insurance pays up to 75% of your pre-tax income for a specified time if you’re unable to work due to total or partial disability. You are normally required to be unable to work for a period of 30 or 90 days before your claim is paid, depending upon the waiting period you chose for your cover

“Clients who are absent from work due to self-isolation or due to office closure following request or guidance from their employer, but who have not received medical advice to refrain from work, will not be classified as being disabled. They will not be able to claim on their income protection insurance.”

So, if you’re not actually sick, but you can’t work due to a temporary business/office shutdown then depending on your employer you may have to use annual leave to cover your time off instead. If you are a casual worker and you do not have annual leave then you may be able to apply for some financial assistance from your bank or the government. Read Mozo’s guide to Australian banks’ emergency Coronavirus relief packages for more information.

I’ve contracted Coronavirus and complications mean I’ll be out of work for 30+ days, can I claim?

If you have contracted Coronavirus and other health-related complications which deter you from working after your insurance waiting period is up, then you might be able to claim income protection cover.

NobleOak explained, “Clients who have symptoms and have received medical advice that they cannot work, and they remain unwell past the duration of the waiting period, will be considered for a claim on their income protection cover.”

Fellow life insurer Zurich also released a statement concerning COVID-19, writing that ‘income secure cover’ should apply ‘if you’re unable to work due to a sickness or injury after your waiting period expires.’

It should be stressed that you will usually need to have an income protection policy in place already, before you become sick to be able to claim. Also, when you can claim will depend on what waiting period you opted for when you took out the policy.

As with all insurance policies, it is good practice to read the product disclosure statement before you sign on the dotted line, that way you should be prepared for what you are and aren’t covered for.

I have life insurance, will my family be able to claim if I pass away from Coronavirus?

Unless your life insurer has added a pandemic exclusion, if you have a life insurance policy already in place before you contract Coronavirus and you pass away, your family should be able to make an insurance claim.

A number of Australian insurers have released statements online, detailing what their general policies are concerning Coronavirus related claims. If your insurer hasn’t made any public announcements yet, it might be worth giving them a ring to find out what their stance is on the issue.

In a statement released by MLC, the life insurance company said, ‘There are no specific exclusions for COVID-19 in any of our policies that would affect the way we assess claims.’

NobleOak also released a statement on Monday saying: ‘there is no pandemic exclusion clause in NobleOak insurance policies, and we have no intention of introducing a coronavirus (COVID-19) exclusion. This means COVID-19 is covered.’

I don’t have life insurance yet, can my family make a claim if I get it now and then pass away from Coronavirus?

If you don’t have life insurance now, you should still be covered if you take out a policy before you contract Coronavirus.

Just be aware that if you have a pre-existing medical condition you may not be able to get life insurance and if you do you, you will most likely be charged a higher premium. Your premium may also be higher if you are a smoker or if you are over a certain age, before you take out the policy.

Another thing to note is that, if you are applying for life insurance now, after the outbreak of COVID-19, some insurers may require you to answer questions concerning your previous travels or anywhere you plan to travel to in the near future.

If you do intend to take out life insurance now or in the near future, you can review policies on offer in Australia on our compare life insurance policies page.

Compare life insurance - page last updated September 19, 2020

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    Tara McCabe
    Tara McCabe
    Money writer

    Tara McCabe writes across all areas of personal finance here at Mozo from banking through to insurance. Tara is expert at practical money tips, showing readers ways to live richer and be socially conscious while doing it. She earned a BA (Hons) in English Literature from Canterbury Christ Church University.