Things to Know about Life Insurance During COVID-19
Insurance Professionals of Arizona | May 8th, 2020
If you’re married, a parent, or own a home, you probably need life insurance. But you might have put off buying a policy until now. The coronavirus pandemic has highlighted the need to protect your family and loved ones. Some insurers have reported a 50% increase in applications in March 2020.
Could your spouse pay the mortgage if they lost your income? What about credit card balances and car loans? If your household has a parent that does not work outside of the home, payment for services to replace their contributions to the household can be quite costly. Life insurance policies pay out a tax free lump sum that your beneficiaries could use to to replace lost income to allow them to maintain their lifestyle, pay off debt, and help pay for a child’s education.
If you’ve realized that it’s time to buy a policy, how will COVID-19 impact your purchase?
No Medical Exams
Before COVID-19, often obtaining life insurance required a medical exam. A health professional would have come to your home to take your blood pressure, draw blood, and measure your height and weight, or you may have gone to a Doctor’s office. While not required by all policies unless you were applying for a large policy, taking an exam typically lowered your premiums.
With stay at home and shelter in place orders, it’s no longer possible for life insurance companies to get a medical exam. They’ve turned, instead, to looking at your health records, prescription records, and other forms of data. If you’re low-risk; under age-60, a non-smoker, low drinker, and of average weight, you might pay less for life insurance than you’d think.
Studies have shown that 44% of millennials think that life insurance costs five times as much as it really does, and that a healthy, 30-year-old man could get coverage for as little as a dollar a day. But what if you fall into a higher risk category, need a larger benefit, or prefer to work with an insurer who normally requires exams?
In response to the coronavirus crisis, many insurers are now offering no medical exam temporary coverage. This coverage bridges the gap between when you apply and when you can take a medical exam. It would pay out to your beneficiaries if anything happened to you in the meantime.
This short-term coverage has an expiration date, typically 60 to 90 days after issuance. At the end of underwriting, it automatically rolls into your new policy.
Not all insurers offer temporary coverage, so if you know you’ll need it, work with an insurance agent to make sure you apply with insurers who offer this as an option.
A typical life insurance application asks health-related questions about exercise, smoking, drinking, and other lifestyle choices that impact your mortality. But now you can also expect to be asked questions related to coronavirus.Your responsibility as the applicant is to answer honestly, as misrepresenting your health on a life insurance application could void your policy.
Insurers may ask if you’ve traveled recently, both within and outside the United States. If you did, they’ll want to know if you went to a virus hotspot. People returning from international travel may have to wait 30 days for coverage.
They’ll ask about potential exposure to the virus, if you’ve had a fever, or tested positive. If you answer “yes” to any COVID-19 related questions, it does not mean that you cannot get insurance, but you’ll likely have to wait to get approved for a policy.
A life insurance policy is something you need but hope to never use. Insurers protect their financial strength – and thus their ability to pay out on claims – in part by pooling risk. During a pandemic, risk rises, and insurers become more cautious.
Some insurers have begun adding exclusionary riders to new life insurance policies which address COVID-19. Exclusionary riders define specific causes of death where your policy won’t apply and won’t pay out. If you’re buying a new policy and have concerns about coronavirus, ask about exclusions.
Already Own a Life Insurance Policy?
The good news is that if you already own a life insurance policy, it will cover you and pay out in the event of a COVID-related death. Insurers cannot make changes to an existing policy that is paid in full or up to date on the premium payments and the policy is in good standing.. If you’re making monthly payments, make sure that you stay current on premiums. Remember that there are life insurance policies that only pay for accidental death. They do not pay out for health related deaths, as would be the case in a death due to the coronavirus.
Some insurers have stopped canceling policies if policyholders can’t pay their premiums, others are offering financial help and payment plans to struggling households. Before letting coverage lapse, talking to your agent or insurer about options to keep your family protected.
Check on Coverage Amounts
Talk to your agent about increasing your coverage – according to the Life Insurance Marketing and Research Association (LIMRA), the average American is underinsured by $300,000. While some coverage is always better than nothing, it’s even better to know that your loved ones would have no financial worries if you passed.
Supplement Employer-Sponsored Life Insurance
That vast majority of employers offer life insurance to their employees, so you may think you don’t need to purchase additional coverage. Not true.
Employer-sponsored life insurance isn’t always portable. If you are laid off or lose your job, you may lose the insurance coverage. Owning a policy that isn’t tied to an employer policy can either match or supplement that policy. If you’re concerned about job loss during the pandemic, talk to an agent about buying a policy now.
What to Know about LIfe Insurance Post-COVID-19…
The pandemic will end, the curve will flatten, and people will go back to work. But the coronavirus could have a long-term impact on the insurance industry.
If the situation worsens, insurers could stop issuing policies, and they might not resume issuing them until there’s a vaccine. If they face large losses from COVID-19 claims, premiums for new policies will increase.
Now is the time to purchase a policy – before exclusionary riders become the norm and premiums rise. Reach out to talk to an insurance advisor at InsuranceProAZ.com today.