Kara Gammell: Coronavirus and Protection

** Correct at time of writing – note underwriting stances from insurers could change at short notice **

The coronavirus outbreak has been labelled a pandemic by the World Health Organization (WHO). At the time of writing (THURSDAY, MARCH 12), there are now 460 confirmed cases in the UK – 387 in England, 36 in Scotland, 18 in Northern Ireland and 19 in Wales. In all, 27,476 people have been tested so far and ten people have died.

The government estimates that up to a fifth of the UK workforce may be off sick during the potential peak if the virus continues to spread, with infections peaking three months after first sustained human-to-human transmission and naturally, the public are concerned.

But it’s not just the threat to our health that is scaring us, with headlines about businesses and schools closing, many of us are starting to worry about the financial implications of being unable to go to work whether due to self-isolation or an actual diagnosis.

Especially if you are like me, and self employed.

When you work for yourself, the cost of the coronavirus is considerable.

Already, I have had clients cut contracts off the back of the financial uncertainty meaning that I am hundreds of pounds out of pocket each week.

Admittedly, thanks to the fact that I mostly work from home, self-isolation will not be an issue as such. But should the schools close as predicted in the media, I will be in a challenging situation where I will be forced to try to work while entertaining my six-year-old daughter.

I don’t want to think about what will happen if I get the virus and present with severe symptoms that leave me bed bound and unable to work at all.

You see, if you are self-employed, a contractor, work on a freelance basis, in the gig economy or on a zero hours contract, your rights to sick pay and time off are much more limited.

Some gig economy employers have said they will offer sick pay if you have to self isolate because of coronavirus. Others have said they might offer some kind of compensation if you have been diagnosed with coronavirus. If you’re working in the gig economy, check with the company to find out what your rights are.

But unless you are one of the lucky ones who has an actual contract in which these details are included, you will not be entitled to Statutory Sick Pay, sick leave or paid holiday leave. Ouch.

There is small, flickering light at the end of the tunnel, however, thanks to the announcements made in the Budget this week.

On Wednesday, the Chancellor said that those who are not eligible for sick pay from an employer, particularly those in the gig economy and the self-employed, will be able to claim Employment and Support Allowance (ESA) from day one of “illness” rather than day eight.

While this is certainly better than nothing at all, ESA is worth just £73.10 a week, or £57.90 for the under-25s. Given that ONS figures show that the average UK weekly wage of £585, it will leave most people short when it comes to covering their household bills.

Sure, the government is also temporarily removing the minimum income floor from universal credit, which could also be helpful for some – but is unlikely to help keep families afloat.

In the past, the minimum income floor, which would have taken into account how much you would normally expect to earn in a month, has been essential in calculating your entitlement to universal credit.

By removing this, the self employed will be able to claim for time they spend off work due to sickness.

“The Chancellor’s decision to extend statutory sick pay to those self-isolating will be a relief to some workers,” said Dame Gillian Guy, chief executive of Citizens Advice.

“But the self-employed and people in the 1.5 million jobs that don’t qualify for sick pay are still at risk of falling through the gaps if they become unwell.

“We’re pleased to see the waiting period for contributory Employment and Support Allowance has been removed, but we know those who need to apply for Universal Credit will still face a lengthy wait for a full payment and could be pushed into debt as a result.”

What can you do to protect yourself?

Rather than simply stocking up on hand sanitiser and loo roll, there are steps that you can take to ensure that your finances are protected.

For instance, have you thought about how you will cover regular bills or monthly re-payments in the event of having to self-isolate and take home hundreds of pounds less than normal?

“Coronavirus fears are crippling the nation and the Government tried its best to calm nerves with a series of measures announced in its Budget,” said Anthony Morrow, chief executive of OpenMoney.

“But while it’s encouraging to see a focus on this from those holding the country’s purse strings, I’m concerned that what’s been announced will do little to help in reality. With statutory sick pay at just £94.25 per week, compared to the average UK weekly wage of £585, two weeks of sick pay could have a considerable impact on monthly salaries.”

Luckily, there is insurance available that could help, although few consumers know about this type of cover designed to protect our salaries should we be unable to go out and earn it due to any illness – not just coronavirus.

Figures from Zurich show that just one in ten of us have income protection, a type of policy that helps to pay vital bills in the event of prolonged periods of poor health where you can’t work.

Yet, by contrast 71% of people insure our homes, 70% insure our holiday and 18% our mobile phone.

But there is no need to panic – it is possible to protect yourself without breaking the bank. Research by Royal London found that a gym membership is more than double the price of income protection.

Monthly gym membership fees in the UK are estimated to be £40.53.

In comparison, according to brokers Lifesearch, a 30 year old, non-smoking male working as an administrative officer could get £18,000 income protection for full term with a 13-week deferred period for less than £20 a month.

The good news is that the pandemic has inspired many people to consider how their finances would hold up in an emergency.

Figures from ActiveQuote show that since January, there has been a 25% increase in customers looking into taking out income protection (IP) due to media coverage and fears related to COVID-19.

What’s more, the broker has reported a rise in telephone enquiries from existing IP customers with coronavirus concerns, specifically whether they are still covered if they contract the virus.

“There are many worried people out there who are contacting us to make sure their income is protected should they contract COVID-19 or coronavirus,” said Rod Jones, head of partnerships and marketing at ActiveQuote.

He added: “This surge in enquiries is understandable as every newspaper and news programme is talking about the coronavirus. We are also hearing about so many people having to self-quarantine for up to two weeks and people being sent home from work, which for many people would mean them being unable to work and missing out on wages.

“Insurers are also reacting to the news that cases are increasing in the UK. Although only a few have changed their underwriting terms for new customers so far, we can see many following suit if cases in the UK continue to rise.”

What this type of cover can do for you

If you’re unable to work for longer than your deferred period as a result of the coronavirus, you’ll most likely be covered by your Income Protection policy providing you developed the virus after the policy went live.

This means you’ll start to receive a monthly benefit equivalent to a proportion of your salary until you’re well enough to return to work or until your payment period is up (this will depend on your policy’s terms and conditions).

What’s more, provided you don’t already have the virus when you apply for the policy most insurers will most likely cover the coronavirus going forwards.

Depending on how the situation unfolds, insurers may look to impose more stringent underwriting restrictions on new applicants who’ve recently travelled to mainland China or other higher risk countries, perhaps with additional screenings or a postponement for a set period.

When applying for protection insurance it is common to be asked about travel abroad and if someone is being investigated for Coronavirus or has travelled to any impacted areas recently, the application could be postponed.

“While no UK life office has confirmed it is planning to change its application questions or underwriting as a result of the virus, recent travel to certain countries will continue to trigger a referral for an underwriter to review the application,” said Emma Walker.

How to make a claim

“In the event that someone dies as a result of the Coronavirus, life cover would be expected to pay out,” said Walker.

“Similarly, if someone contracted the virus and could not work as a result, income protection policies would also be expected to pay out accordingly.

“However, it is unlikely a successful claim could be made under a critical illness policy as it would not meet the illness definitions or qualify under the total permanent disability (TPD) part of the product, as aside from death, there are currently no signs that the Coronavirus causes long-term disability. If the critical illness cover includes death benefit then this would fall in line with life policies paying out if someone died from Coronavirus.”

So, if you are unwell, unable to work and adequately insured – claim straight away as there’s usually a waiting period before the policy pays out. If you do not have protection in place, get in touch with a broker such as Cura, Lifesearch, Drewberry or ActiveQuote.

Remember to be completely honest in your answers to all the questions on the application, for example your medical history, otherwise the policy could be worthless.

You might feel that you are having to give far too much information, but if you hold something back it could really affect whether the insurer pay out in the event of a claim.

ENDS

** Correct at time of writing – note underwriting stances from insurers could change at short notice **

This item can contribute towards your unstructured IDD CPD requirement.