In most insurance contracts, a covered loss for property must be “sudden and accidental.” It’s hard to imagine a company willing to pay for injury or losses that were expected to happen. But the greatest threat of the 2020 pandemic was the loss of life and loss of wages, not the loss of physical assets—both of which are losses covered by life insurance and commercial policies.
COVID‑19 first appeared in November 2019, and four months later, the World Health Organization declared it a pandemic. During those four months, there was discussion about how the nation would handle the effects of COVID‑19—and who should pay for them. An earlier disaster helped give us a reference point.
Directly after the September 11 terrorist attacks, there was debate over whether any of the damages or loss of life would be covered, due to it being an “act of war,” which is excluded in nearly every policy. Insurance companies quickly determined to treat that attack as a covered loss and paid more than $40 billion in claims.
COVID‑19 appeared to be far more deadly and disruptive than the September 11 attacks. Initial estimates placed losses between $700 and $900 billion. While commercial insurance policies included “business interruption” coverage as a possible avenue for payment, it had to be preceded by direct physical damage. Industry leaders argued that the COVID threat was too large for them to cover and would mean the complete bankruptcy of America’s insurance industry. Shutting down huge portions of the workforce and paying people to stay indoors proved too much. The federal government had to step in.
Funds provided by several spending and relief bills passed by Congress amounted to more than $4.6 trillion to offset the effects of COVID‑19. This sum is staggering—it’s equivalent to having a Hurricane Katrina‑sized loss ($200 billion) every day for almost a month. In 2020 and 2021, life insurance benefits paid a combined $200 billion for COVID‑related deaths.
Millions of dollars have been spent in legal fees surrounding mandatory shutdowns, vaccinations, wrongful terminations, relief payment fraud, and more. Six years after the initial appearance of COVID‑19, many long‑term legal cases remain unresolved.
One thing’s for sure: before you say to your agent, “I’m covered, right?” remember that the devil is in the details. There is a complex web of insurance protections that work to keep our nation functioning—so far, it hasn’t failed.
