Will protection insurance costs rise because of coronavirus?

I’ve got life and critical illness cover but I’ve heard that these could be affected by the pandemic. 

I’m also concerned that my cover providers will include exclusions to my polices, especially now that there’s an increase in Covid-19 cases again and another lockdown. 

I’m also worried that I’ll have to pay more. Will my protection insurance premiums go up because of Covid?

Angelique Ruzicka from this is money replies: Protection policies are there as a safety net in case the worst happens. 

They offer protection in the event you become ill or pass away and still have financial obligations such as a mortgage to pay off and have dependents.

With the news of Covid-19 cases increasing and with all the uncertainty it’s understandable that you’re concerned about having to pay more. But this all really depends on whether you’ve agreed to a guaranteed rate or not.

If you switch you could end up with a great deal initially, but your provider may hike your premiums at a later stage and you could be worse off than before.

If you switch, you could also end up paying more if you have an underlying health condition like diabetes or if you have a high body mass index reading.

There may not be any better deals out there. Some smaller income protection insurers, for example, have applied exclusions to new business.

There are also reports that underwriting may be harsher in certain postcodes, potentially linked to life expectancy and Covid-19 case numbers. 

You don’t, however, state where you’re from so we can’t say whether this will affect you.

There are lots of things to consider before switching – it’s wise to speak to a financial adviser before making any rash decisions.

Ben Burgess, senior protection adviser at LifeSearch, responds: Since March, many policyholders may have been understandably concerned about the effect of the virus on their insurance premiums. 

While Covid-19 has certainly had an impact on the protection industry, so far it hasn’t been as severe as most people would imagine.

Policyholders who took out their cover before the pandemic on guaranteed rates, need not worry about price hikes or Covid-19 exclusions, as existing policies are not impacted. 

This is because insurers cannot change the price of existing policies where premiums are fixed.

However, if the policy was taken out on reviewable rates, where premiums can be changed in certain situations, there could be changes ahead, if not already. 

Reviewable rates are initially cheaper than guaranteed rates but may increase over time. 

With Covid-19 increasing the amount of life, critical illness cover and income protection claims expected to be paid out by insurers, individuals with reviewable rates may see an increase in their monthly premiums.

What about individuals who want to take out cover for the first time or who are looking to amend their existing cover? 

The advice is to weigh up what you can afford now with what cover you need in the medium to long term. 

With tougher economic times ahead, a lower amount of cover with a fixed premium would provide more certainty.

It would also be prudent to set a policy up now rather than waiting until after the pandemic ends, if it does end, and especially as it looks like we are now entering a second wave. 

This is because we are yet to see notable price increases and despite the virus life insurance and other protection cover is still widely available.

There are two essential points to consider:

1. Hold onto your existing cover if you can. 

If you have taken a financial hit due to Covid-19 and now feel your premiums are too high, it’s worth exploring other options such as career breaks, premium holidays or lowering your pay-out options. 

Your insurer and your adviser will work with you to amend current cover to make it affordable. Cancelling your cover should be a last resort.

2. If you are setting up cover for the first time or adding new cover to your existing policies, it’s often best to do so on guaranteed rates. 

Do not delay in the hope that things will go back to normal soon. 

We do not know how long the pandemic will last, what the long-term impact will be on both physical and mental health or just how much premiums will increase to account for it.