One of the regular questions financial advisers have been getting since COVID-19 became a serious issue has been how insurance will respond. The short answer is, generally well. The not-so-short answer is that most policies will respond as intended, with a few exceptions.
So how are the different insurances faring?
If you purchased travel insurance BEFORE 1 January, you’re probably going to be okay and your cover should respond correctly.
However, if your policy has exclusions:
- for pandemics or epidemics – you are likely to find these won’t respond before you travel. If you’re already travelling, then the policy may respond – but not always
- bank-provided covers, both in-branch and credit card, typically exclude pandemics and epidemics
- better policies will support you, provided you’re following the travel guidelines from World Health Organisation (WHO) and Ministry of Foreign Affairs and Trade (MFAT), and not going to a restricted destination
- If you have an annual policy or a corporate policy, this should be okay – subject to the MFAT and WHO travel guidelines
If you purchased your insurance AFTER 1 January, there is a reasonable chance COVID-19 impacts will be excluded.
If you purchased AFTER 22 January, COVID-19 will likely be excluded from the cover. With some providers, 31 January and a couple of dates in February will be the cut-off, after which cover will be excluded.
As above, if you happen to have an annual policy or a corporate policy purchased BEFORE January, then this should be okay, subject to the MFAT and WHO travel guidelines.
On 19 March, the Government issued a do-not-travel advice, effectively meaning any new travel from New Zealand has no travel insurance coverage.
In all cases, you are strongly advised to check with your financial adviser or the insurance provider.
Medical insurance in New Zealand is designed to respond to elective surgery only – these are the types of treatments that are not emergency and that the public system takes its time getting to.
As far as medical insurance goes for COVID-19, it’s not going to respond to the immediate emergency or critical care needs demanded by this virus. That will be at the cost of the government health system, and won’t be an insurance cost.
The one area where your policy may respond is with a public hospital cash grant. If these are part of your policy then they typically kick in after being in hospital for three days and pay a day rate up to $300 per day for up to 10 days. Check your policy for details, and also check exclusions for infectious disease, epidemic, and pandemic exclusions.
Once out of the critical care phase of recovery, anything that needs to be followed up as a result of COVID-19, provided it is not critical, can be covered in the private system.
Again, this is completely dependent on what is going on at the time, and you need to check your policy for exclusions for infectious disease, epidemic, and pandemic exclusions.
Medical facilities will be focused on treating sick people in an emergency situation, so anything that’s not an emergency is not going to get any attention at this time. It’s likely non-essential elective surgery and treatments will be postponed to free up hospital space and capacity in the event of a rush of COVID-19 cases.
(including household expenses and mortgage repayment cover)
This involves the medical incapacity of the person insured, so being in quarantine will not be a trigger for income protection directly. Any medical incapacity is claimable, subject to the wait time on the policy and any exclusions.
Given the nature of the COVID-19 risk, it’s unlikely people will have specific exclusions for this, unless they have lung exclusions.
If you are admitted to hospital under medical supervision then that’s claimable, and is not subject to a waiting period on the policies that have it. Most, though, will require an admission period of at least 72 hours before a claim can be accepted.
For each day in hospital, this benefit pays 1/365th of the policy annual cover amount or 1/30th of the monthly benefit. Once released from hospital, ongoing impairment will also be considered for a claim.
In the event you contract COVID-19, unless you are admitted to ICU or have severe symptoms that cause other medical issues, it is unlikely you will be able to claim for a trauma payout.
Just 5% of people who catch COVID-19 need ICU support and about half of those need mechanical ventilation. Trauma cover will start to respond if you need a ventilator.
Other conditions seen in cases overseas that may also be claimable include heart conditions and encephalitis (infection in the brain that we see often associated with unvaccinated measles).
The chances of trauma cover being needed are expected to be much lower than the need to follow up with medical insurance or being the cause of a short term disability claim.
Total & Permanent Disability
It’s unlikely this benefit will be needed in most cases involving COVID-19. It would respond where an infected person suffers irreparable injury or damage that prevents them from returning to their normal role, or to a role they are suited to by training and experience if on an occupation policy.
If this cover responds at all it would most likely be for damage to a person’s brain (encephalitis) or lungs. The test is being medically unable to return to their occupation, or any occupation if on that policy, and they are likely to never recover to do that role again.
The mortality rate for COVID-19 infections is between 1-3%, and typically those who die will be older. For those over 60, there is an increased risk with the virus, though once over 65 many people cancel their life cover, so that ability to claim does disappear. With people of working age, this is significantly less of a risk, but there is still the possibility there will be claims.
Most people do retain their medical cover, and it is under the medical cover that there can also be death benefits. Those under 70 with medical coverage, though not with Southern Cross, will likely have some level of death benefit built in.
An additional feature of the adult medical cover death benefit is the waiver of premium for the surviving members on the policy.
Where to from here?
- Check you have the right insurance coverage
- Check that you have an up-to-date will
- Check that you have a suitable power of attorney in place in case you are incapacitated but still alive
In each case, contact an insurance broker or your financial adviser
- Abridged from an article by Jon-Paul Hale of Willowgrove® Consulting