You may think your life insurer does not need to know where you travel to and for how long. However, that is not the case. Your life insurance provider is very interested in learning about your travel plans, as your insurer uses this information to decide your eligibility and health classification. Continue reading to find how international travel outside Canada affects your life insurance policy.
Why is life insurance necessary during travel?
Are you planning to go on a big trip soon, and you have heard travel insurance can help you protect it? Yes, it can.
But there are a couple of questions that still need to be answered:
- What does international travel insurance in Canada actually cover?
- Do you also require life insurance?
Here is the thing. Travel insurance and life insurance are two different products. As such, they come into the picture in completely different scenarios.
Travel insurance policies generally provide coverage for things like medical emergencies. They also cover trip interruption, trip cancellation, and medical evacuation. In addition, they cover lost, stolen, or damaged luggage. Some plans also provide coverage for rental-car damage and pre-existing conditions.
Travel insurance helps you deal with the aforementioned uncertainties during an international trip. It is meant for accidents and not for protecting your life. Were you to die while traveling, your travel insurance will not issue a payout to your family.
For that, you need life insurance. It provides people you love with financial assistance should the unthinkable happen.
Does life insurance cover travel outside Canada?
For the most part, the answer is: Yes.
However, a travel history to certain countries may push your premiums up, or lead to a rejection of your life insurance application.
When you apply for a life insurance policy, you will need to disclose your recent travel history and future travel plans. If you frequently travel to a country regarded as dangerous, the insurer may:
- Charge you more than the standard rate
- Place an exclusion on the plan for those countries
- Deny the coverage altogether
We advise you against lying or withholding information on your application. Hiding information from your insurer can lead to your claim being rejected.
Why is travel outside Canada considered during underwriting?
Like any business, insurance companies, need to make a profit. One way they minimize their financial risks is by correctly assessing an applicant’s mortality risk. Which, in turn, helps them to price accurately. For this reason, insurers study all the factors that can make applicants riskier to insure. These include such things as a family history of certain illness, and/or a dangerous hobby.
Underwriters consider health concerns and safety while evaluating applications. Traveling to a politically unstable country may put you at risk. The same goes for a country with civil war or poor healthcare infrastructure. Underwriters look at countries with high death rates with greater scrutiny.
What countries void my life insurance coverage?
The Government of Canada website categorizes the overall risk level of a country in the following ways:
- Exercise normal security precautions
These countries are regarded as the safest. Their overall security and safety situation is not much different than that of Canada.
- Exercise a high degree of caution
While these countries are largely safe to travel to, there are identifiable security and safety concerns.
- Avoid non-essential travel
These countries have specific security and safety concerns, which can put travelers at risk. Leisure travel to these countries should be avoided.
- Avoid all travel
This group consists of countries at war or strife with political instability or terrorism. These countries are deemed extremely risky, so avoid traveling to them completely.
If you travel to countries belonging to category 1 or 2 above, there is nothing to worry about. You will qualify for the standard insurance coverage and premiums.
The insurer, however, will inquire about your stay term and traveling purpose if you are visiting a country from the third category. You may be charged a higher rate if your stay is under three months. A Longer stay, however, may push your premium rate up. The insurer may reconsider the extra charge if you have not visited a high-risk country in the last year and do not plan to visit one any time soon.
Countries like North Korea, Afghanistan, Iran, and Iraq fall under the fourth category. Travel history to such countries can disqualify you from life insurance altogether.
How does traveling outside Canada affect my coverage?
Life insurers view travel to some parts of the world riskier than others. If you have travel plans to countries rated as minimal or low risk, you likely will have no problem qualifying for standard rates. On the other hand, if you are traveling to a high-risk country, insurers may decline your application.
You are only likely to experience issues in buying a policy if you plan on traveling to countries rated medium to high risk. In such a scenario, the insurer may put a cap on how much coverage you can have, charge you higher premiums, or even deny you coverage altogether. If you are trying to buy a short-term life insurance policy just before a trip, this is likely to deter underwriters as well.
An independent broker such as Dundas Life can help you understand how your international travel plans outside Canada will affect your life insurance application.
Which jobs are not covered by life insurance?
If you need to travel frequently for your job, your ability to get life insurance may be affected. Canadian life insurance companies classify several jobs as hazardous. You will not qualify for standard life insurance if you have such an occupation. For instance, military workers and diplomats are not eligible for life insurance through regular insurers. That is because they have a far higher risk of dying abroad.
Does life insurance pay out if you pass away outside Canada?
As long as you were honest about your plans to travel on your application, the insurer cannot refuse to pay out if you die overseas.
Let’s say you shared planned travel to a country rated dangerous and were able to get coverage. If you die during your overseas stay, the insurer cannot deny the claim. That is because you did not lie or withhold information when applying.
Likewise, if you die in a country that was put on the travel warning list only after you received coverage, your family will still receive the benefit. Insurance companies cannot reject the claim on account of a change in global circumstances.
The long and short of this is, if you were honest in your application, you have nothing to worry about. Your beneficiaries will receive the policy proceeds after your death.
Your travel history and upcoming travel plans can affect your life insurance eligibility and premium rate. Insurance companies may charge you a higher premium or deny your application if you travel to countries deemed to be risky. An independent life insurance broker such as Dundas Life, can help you find the best coverage for your situation, at the most affordable rate.