Are You Covered for Covid-19?

While you may be covered for sickness or illness under your insurance, your business may not be protected from the full range of threats from the coronavirus pandemic. This is why it is so important to speak to an advisor before you take out policies, to make sure you are adequately covered.

If you have life insurance or income protection insurance you would likely be covered in the event that you contract coronavirus and become ill. This would be covered under sickness or accident / Income Protection cover that is included as a separate cover to your business insurance.

Most business insurance policies will require physical damage to a place of business to pay out any claim for economic losses sustained. Then there must be an interruption to the insured’s business as a result of that direct physical loss which triggers the policy to respond.

As Ken Ryan, Managing Director of Coast and Country Insurance explains, “If you are forced to close your business due to coronavirus are you covered by your insurance? The short answer is more than likely, no.”

“All policies vary so we urge you to contact us with any questions, you can email or call us, we are still operating during COVID-19 restrictions,” Mr Ryan says.

The Insurance Council of Australia has already said that most business interruption claims for COVID-19 will be denied, even if the business is forced to shut down by government order.

While insurance will cover businesses where governments order places of business to close due to damage to an adjacent property, closure for de-contamination or preventing the spread of illness is unlikely to be enough.

Insurers will often list the diseases specifically covered by infectious disease extensions. As COVID-19 is a new disease and was discovered only recently, it is unlikely that it is included in any current insurance policies.

The World Health Organization confirmed on 12 March that the COVID-19 coronavirus outbreak would be classified as a pandemic. In light of this, the Insurance Council of Australia also announced that the ongoing outbreak was an “insurance catastrophe.”

While the ICA says the extent of claims and losses related to the coronavirus is unknown at this point, it has formed an insurance industry taskforce to ensure that accurate claims data is captured by the industry, and that insurers’ positions on the virus can be understood by stakeholders.

Coronavirus was declared a notifiable disease in New South Wales on 22 January 2020, and this may provide the best chance for a successful insurance claim for businesses affected by COVID-19.

It  could apply if your business insurance covers impacts of “notifiable diseases” or “notifiable human infectious or contagious diseases”. Although, this may also be limited to a mandated closure of your place of business due to a notifiable disease by a public authority.

Income protection insurance

Those people with income protection insurance, including many sole traders and tradespeople, are covered for illness that prevents them from carrying out their normal business activities.

“This is where the benefits of income protection insurance become apparent,” Mr Ryan says. “People think that worker’s compensation will cover them for everything but it doesn’t, it only covers you while you’re at work and not to and from work anymore.

“In contrast, income protection insurance will cover you all the time, 24/7, including outside of working hours.”

Those with income protection insurance or life insurance may be able to claim benefits if they are diagnosed with COVID-19 and in some cases their insurance can pay up to 75% of their income for the period of their illness.

 “You would have to be diagnosed with the virus and then you would need to go through the waiting period on your insurance policy,” Mr Ryan says. “This can be as little as seven days, but depending on your policy could be 30 days or more.”

Insurance considered “essential service”

Under the government’s COVID-19 restrictions, insurance is not listed as a restricted activity or business. This means that the industry is continuing to operate and to handle as many claims as possible under the current conditions.

Given the uncertainty created by COVID-19 and discussions taking place by governments about rental protection measures, some insurers have placed a temporary embargo on the sale of landlord insurance policies.

Insurance companies and brokers are already dealing with an extraordinary burden from more than 252,000 claims worth $4.6 billion following the “angry summer of natural disasters”.

While it’s likely that most insurance business operation will remain available during shutdowns, it’s inevitable many customers will experience delays and interruptions.

The ICA is seeking further clarity from governments on essential services arrangements. For example, whether emergency repairs and motor vehicle claims and repairs would continue, if the current shutdown becomes more severe.

Under the current limited shutdown arrangements:

  • Claims, assessment and repair services are continuing, which helps ensure Australians can have safe homes and motor vehicles. Delays may be experienced.
  • Repair and rebuilding work on properties that have been damaged or destroyed over spring and summer are mostly continuing, though some builders are no longer able to provide their services.
  • Supplies of some building and motor vehicle materials are now becoming scarce due to disruption to manufacturing in China.
  • Claims settlements, and the sales and renewals of most products along with most back-office functions, are ongoing.
  • Overseas call centres have mostly been shut down by local authorities.
  • Australian staff are taking on this extra load, usually working from home, which means call delays may be longer than normal.

It is recommended that if you do not understand how your policy may respond to COVID-19 triggered losses, to speak to your broker for more information.

General Advice Warning: The content of this article is general advice only and should not be acted upon without first consulting an industry specialist as it does not take into consideration your personal needs, objectives or financial circumstances.

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