Income Protection and the Coronavirus

As the COVID 19 pandemic continues people are turning to existing insurance policies to see if they provide any payments for sickness, being unable to work and self-isolation. Needless to say, this is an unprecedented situation and it remains to be seen how the industry will react. However, as with all forms of insurance, there are lots of different policies out there, tons of T&Cs and varying levels of cover.

It’s likely that we’ll see two types of complaint in the coming days.

• People who want to make a claim and have been unable to get in touch, or get turned down.
• People who decide that they want to take out an income protection policy but can’t or find that COVID 19 isn’t covered.

As a general rule, insurance is there to cover you for unforeseen events. As the pandemic is now worldwide, it’s extremely unlikely that policies taken out now will cover you retrospectively for the virus.

The policies

There are lots of types of policies that protect your income:

Short term polices. These include things like mortgage protection (MPPI), payment protection (yes, PPI! – there are new variants on this product out there) and accident, sickness and unemployment (ASU) insurance. These pay out over a year or two.

Long term policies. These are designed to cover you for specific things that lead to long term disabilities and aren’t likely to be relevant to virus related claims. Often known as ‘permanent health’ policies – critical illness cover is often lumped in to this category too.

Will my insurance pay out for Coronavirus?

Over to the Association of British Insurers (ABI) for this one, who say:

5. Income Protection Insurance

Income protection policies, whether provided by an employer to employees or bought by individuals, typically cover long term absence and have a waiting period before they kick in. Such policies are unlikely to cover people self-isolating as they probably won’t be off work longer than the waiting period. However, some policies with a short payment term are designed to kick in with either no waiting period or only a period of one week, and so are likely to cover people who are self-isolating and unable to work. https://www.abi.org.uk/products-and-issues/topics-and-issues/coronavirus-qa/#e

So short term policies may well pay out – but many people will have them through their employers, which will keep HR departments busy.

New policies

Even if you did manage to take out a new policy, it’s likely that there would be an initial period of a number of months before you could make a claim (known as the ‘deferred’ period). So it’s unlikely that the current pandemic could be claimed for, even if you took out a policy in January.