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COVID-19: Life Insurance Cover – Not as Easy as Just “Ticking a Box”

5 minutes read time

In light of the recent developments with COVID-19 and the risks it has generated to public health, individuals may consider obtaining or altering their life insurance cover. Consideration must however be given to any exclusion clauses and/or requests for genetic information.


Anxiety, worry and concern are emotions currently being felt by many Australians due to the unprecedented effects of COVID-19. During this uncertain period, where individual health is in jeopardy, individuals may be looking to obtain or increase their life insurance cover.

Life insurance applicants should be aware that if they are looking to obtain or alter existing life insurance cover, their insurer may incorporate a COVID-19 exclusion clause  in  their policy.

Additionally, amid the chaos of COVID-19, if individuals do obtain new cover or alter their existing cover they must also turn their mind to whether they have previously undertaken a medically mediated genetic test or even one that has been obtained online (even if just as a retail promotion to determine ancestral history) as their insurer may require the results of any such test.


Applicants should be aware that Coronavirus may prompt life insurers to introduce COVID-19 exclusion clauses into life insurance policies. This is particularly problematic due to the broad reaching and unknown implications of COVID-19, where Australian life insurers attempt to secure industry financial stability in the long term, amid the turmoil of this global pandemic.

There may be existing pandemic exclusions already in some policies. Further, any increase in cover now may not come into play in the event that an applicant contracts Coronavirus under the “known event” provision.

Disclosure Obligations

While life insurance contracts are guaranteed renewable in Australia once they have been instated, (i.e. there is no duty to disclose new information discovered after the contract has been established), this duty arises upon alteration of an existing policy.

If an applicant does decide to obtain or alter their existing life insurance policy as a result of COVID-19, they should be aware that their disclosure obligations may require disclosure of information that they have not previously considered, pursuant to Section 21 of the Insurance Contract Act 1984.

Genetic Testing

Historically insurers assessed risk actuarially across a broad spectrum of factors, such as lifestyle habits and the pre-existing health of an applicant. However, information from genetic testing provides a far more granular level of individual assessment. Although not linked to COVID-19, any new or altered cover could trigger a requirement to disclose this information.

Intrinsically, and as permitted by Section 21 above, insurers have over recent years increasingly invited disclosure of genetic information from applicants to individually profile and price risk. This can be problematic for individuals who have undertaken ‘over the web’ genetic tests to find information about their ancestral history, for example.

A failure to disclosure relevant information (such as a genetic test result) can result in an insurer seeking to avoid the contract on the basis that the applicant has failed in their duty of disclosure, made a misrepresentation or at the extreme acted fraudulently.

Requests for genetic information by insurers has come under scrutiny in recent times. This has resulted the creation of a moratorium to limit opportunities of genetic discrimination by Australian life insurers.

The Moratorium

Effective from 1 July 2019, the Financial Services Council announced a moratorium on life insurers, preventing disclosure of genetic test results, unless the following exceptions apply:

  • cover exceeds $500,000 for death or total permanent disability;
  • cover exceeds $200,000 for trauma and/or critical illness; or
  • cover exceeds $4,000 a month in total for any combination of income protection, salary continuance or business expenses ($48,000 annually).

The limited breadth of these exceptions mean that the moratorium is unlikely to apply to the average Australian who is seeking to protect against death or total and permanent disability, if they have a young family and a mortgage.

Further, the moratorium may be ineffective where the applicant is seeking to increase cover above the agreed limits.

Although it is tempting to take out new cover or increase existing life insurance cover due to the threat of COVID-19, applicants need to be mindful that it may not be as simple as just “ticking a box”.

This information is current as of 1 April 2020. The speed with which COVID-19 is spreading and the varied responses both internally within Australia and externally change on a daily basis. It is important that you regularly keep up to date with all relevant information and be prepared to respond as the landscape in which the virus is moving changes.

Ralph Bönig discussed this topic with InsuranceNews, in COVID-19 puts spotlight on life policy exclusion clauses

This Alert is intended as general information only. It does not purport to be comprehensive advice or legal advice. Readers must seek professional advice before acting in relation to these matters.