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Spring 2021  Volume 14, Number 1        
 

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The Increased Importance of Life Insurance During the Pandemic

The popularity of life insurance has grown during the pandemic. Here's why it's a wise purchase.

Interest in purchasing life insurance has soared during the pandemic. Experts say that now may be the best time to buy it, before prices rise to cover the cost of COVID-19 related illnesses.

According to the MIB Life Index, the life insurance industry's timeliest measure of application activity across the United States, life insurance applications during the first half of 2020 increased 1.5 percent from the previous year. Applications for those younger than 44 rose about 3.4 percent, while activity for ages 45 to 59 was up 0.5 percent.

As states implemented shelter-in-place orders and several states had massive outbreaks, more people began to worry about their mortality and whether buying life insurance might be a good addition to the family's financial strategy.

Why Now?

Anytime is a good time to purchase life insurance if you're in a situation where you want to provide for your dependents’ financial future. However, experts point out that shelter-in-place rules and increased demand have made it an optimal time to purchase life insurance because medical exams often are being suspended.

In addition, three primary providers of life insurance medical exams have stopped operating. But insurance companies have not stopped writing life insurance policies. Without in-home visits and medical exams, the result is a considerable shortening of the normally lengthy application process that includes labs, doctors' visits, documentation and in-person meetings.

Instead, some insurers have been using data from electronic health records and prescription databases as a substitute for medical exams. However, insurers may still ask for a medical exam if the individual is looking for $1 million or more of coverage.

It's expected that companies will eventually re-introduce exams in exchange for lower rates.

But prices will go up soon. Experts say your chances of getting a good rate are better now. The COVID-19 mortality risk is too high for many companies to keep offering policies at current prices. Life insurance rates are expected to eventually increase 5 to 10 percent over the next year, or carriers will reinstate requirements for medical exams.

What to Expect Now

Insurers usually ask questions about an applicant's health, prescriptions, family health history, driving record and dangerous activities such as sky-diving.

Since the insurer is assessing risk, COVID-19 questions are becoming a standard part of applications. Answering questions positively about COVID-19 could lead to the postponement of getting coverage. Plus, there’s uncertainty about how the virus will affect a person’s long-term health and life expectancy.

While some insurers may rely on reviews of your medical records, others are using previous doctor's visits or in some cases, still sending medical professionals to the applicant's home.

Two Basic Types of Policies

There are two basic types of life insurance policies — term and permanent.

Term life insurance covers a person for a specific period, usually 10, 20 or 30 years. If the policy holder dies while the policy is in place, their beneficiaries will receive the death benefit.

Permanent life insurance — which includes universal life, variable life and whole life — covers the policy holder as long as they are paying the premiums. Not only does the policy pay a death benefit, but it creates a savings account where the policy holder can earn a minimum guaranteed interest or dividend.

Need more information? Contact us to learn about your options and what policy and application process might be best for your situation.

 

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In this issue:

This Just In...

Congress Takes the Surprise Out of Surprise Billings

Pros and Cons of Having Two Health Insurance Policies

The Increased Importance of Life Insurance During the Pandemic

Social Security Adjustments for 2021

 


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