COVID-19 and Life Insurance

As we proceed forward and hopefully put the COVID-19 pandemic in the rear-view mirror, what has been the impact on life insurance policies? As the pandemic hit and took so many lives, Americans have had a renewed interest in life insurance. Jeffrey Greene of Insure.com testifies, “Life insurance ownership has been on a steady decline for years, but the COVID-19 pandemic changed consumer attitudes about life insurance.” Life Insurance Marketing Research Association (LIMRA) estimated that only 54% of Americans had life insurance in 2020, down from 63% in 2010. That seems to be changing” (insure.com).  Life insurance policies are paying the death benefit to victims of COVID-19. Andy Markowitz of AARP affirms, “as long as you have an active life insurance policy in good standing, your beneficiary or beneficiaries will get a death benefit should you die of coronavirus-related complications”. Life insurance companies are still selling and underwriting policies during the pandemic but with tightened qualifications in some ways and looser qualifications in others.

Pre-pandemic, physical exams were typically required unless you enrolled in a group plan. Since the pandemic and the resulting social distancing mandates, physical exams are no longer required, allowing for life insurance adjusters to use third-party data, client reports, and medical reports from past claims or medical histories. Since the pandemic, life policies can be issued to individuals who have recovered from Covid-19. Markowitz concedes, “however, getting covered could take longer, particularly if you are in a high-risk group, have recently traveled to a hot zone or had COVID-19 yourself” (aarp.org).  Many companies require the person be recovered from the virus for 30 days without symptoms before they will issue a policy. Green asserts, “if you were hospitalized, the insurance company will want to wait 60 days to six months after recovery before considering your application, depending on the severity and treatment of the illness . . . Life insurance companies will base life insurance rates on the residual effects of the illness rather than Covid-19 itself” (insure.com).  Greene urges that having been vaccinated for Coronavirus will not invalidate or prevent coverage for a policy. He asserts there are some companies rewarding policyholders for participating in a healthy vitality program (insure.com).

Since the pandemic, life insurers have looked at age more closely when approving policies. At the start of the pandemic, insurers implemented restrictions on application approvals for applicants averaging age 76 and above. Markowitz reveals, “several large insurers restricted sales of new life policies for older adults. For example, Prudential, Lincoln National and Protective Life suspended or delayed policy applications for people aged 80 and over, and Securian postponed applications from consumers aged 76 and older…” (aarp.org).  Markowitz does add that some companies have also loosened restrictions placed on age as more data becomes available from health organizations, and data that constitute higher risk for Covid -19.

If you have placed riders or plan to place riders on your life insurance policies for long-term care, these premiums could be impacted. For existing policyholders, Markowitz says, “premiums for existing policies can’t be raised for specific customers due to individual circumstances. However, rates can be subject to periodic group increases based on an insurer’s claims history, or actuarial projections for future claims” (aarp.org).  For new policyholders or those looking for new long-term care (LTC) coverage, the impact has not yet been determined. “The outbreak could have an effect if you are looking to purchase a new LTC policy. As with life insurance, age and health status affect whether you qualify for long-term care insurance and the cost of premiums. LTC insurers may take into account whether you are at elevated risk or have tested positive for COVID-19 in assessing a policy application,” cautions Markowitz (aarp.org).

The business of life insurance is booming right now and is projected to continue through the rest of the year. “Individual life insurance policy sales have soared to their highest levels in decades . . . Lifted in part by pandemic demand,” explains Susan Wells of Investopedia (investopedia.com).  There has been a rejuvenation in the idea that there is a need for insurance and protecting and providing for those you leave behind too soon.  While the pandemic has increased the demand for a safety net, it has also allowed insurance companies to offer more modern benefits. CNBC asserts, “As a result, the pandemic has motivated the customer to explore options and choose suitable life insurance coverage, ensuring that an individual and their family are adequately covered financially in the event of untimely death. These uncertainties have also pushed insurance companies to evolve policies to the point that, in addition to offering a death benefit to the policyholder, a policy now includes many features such as investment growth, guaranteed income options, market investment opportunities, goal-oriented investments, and much more, all while ensuring an individual’s family’s financial future” (cnbc.com)

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