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What Employees Need to Know About COVID-19 and Life Insurance Benefits

With COVID-19 still in the forefront of everyone’s mind, your employees may be wondering if the life insurance they purchased or that you provided will pay their beneficiaries if they die from the disease.

The answer is yes — with a few exceptions.

Many employers offer their employees a group life insurance policy. The policy is usually term life and only pays benefits to beneficiaries if the employee is still employed at the company at the time of death. Some employers also offer other types of coverage options, such as accidental death and dismemberment (AD&D) insurance.

The only time a benefit would not be paid to a beneficiary after the employee died from COVID-19 would be if they only had AD&D insurance. This type of policy doesn’t pay out if the insured dies of illness or disease. However, employers sometimes add AD&D coverage to a standard life insurance policy as a rider. In that case, the underlying traditional policy would pay out for a death from COVID-19.

Your employees might have their claim denied if they purchased life insurance on their own and the following instances occurred:

  • They didn’t fill out the application accurately. Insurance companies can refuse to pay benefits if they find false information.
  • They fell behind on their insurance premiums. Insurers usually give their members 30 to 31 days to catch up on a payment. However, some state regulators are requiring insurers to extend the grace period during the pandemic.

Social Security Survivors Benefits: Beneficiaries should also check to see if they are eligible to receive Social Security Survivor benefits. If the person who died qualified to collect Social Security when they retired, their spouse or children may be allowed to collect a percentage of their payouts. Most people work and pay Social Security taxes at least 10 years to earn enough to be able to provide survivors benefits.