By mid-January 2022, the United States had recorded more than 865,000 deaths attributed to COVID-19. Once the vaccine was available in early 2021, life insurance companies expected COVID-related deaths to decline. However, the inability to effectively contain the virus has led to the highest death rates ever seen in the history of the life insurance business.
What does that mean for life insurance premiums going forward? Given the number of benefit payouts over the past two years, it could mean stricter underwriting. After all, if people are going to die earlier than their expected lifespan, there will be less time to accumulate premiums — so they may have to increase rates to pay for more people dying at younger ages.
Presently, insurers are not asking new applicants whether they are vaccinated, but some are requiring blood and fluid testing — which may give them those answers. The way insurers stay solvent is by being good at identifying risk, and COVID is a risk that’s going to make life expectancy more difficult to gauge as the virus continues. While some underwriters use nonmedical factors to establish risk — such as population statistics — the current wave of premature deaths due to the pandemic does not bode well for premiums established this way either.1
It has always been important to have safety net solutions to secure your family’s finances should the main breadwinner pass away. The pandemic has not changed that in any way, but it has raised the risk of premature death. While Social Security, Medicare and Medicaid are the government’s attempts at creating income and health care safety nets, for most households that is not enough.2 Now is a good time to consider more life insurance coverage while premiums are at pre-pandemic rates. Please contact us if you’d like an insurance review to make sure you are properly covered should something happen to either the breadwinner(s) or the caregiver(s) in your household. We have solutions that can combine the need for life insurance, retirement income and long-term caregiving if necessary.
Do life insurance policies cover COVID-19? For the moment, yes. All existing policies must adhere to their terms and cover the death of policy owners. However, if applying for a new policy, it is important that you complete your application form honestly and correctly. If you don’t disclose that you’ve already had COVID or that you recently traveled to a highly affected area, your policy can deny benefits.
Has COVID-19 made it harder to get a new life insurance policy? Yes, it has. It can take longer to get approved for a policy if you’ve been infected with COVID-19 or have recently been in an area with a high outbreak. Some policies have reduced the oldest age for which they will issue a policy. And if more reliable life-saving vaccines and treatments are not developed, the industry could incur higher costs associated with life insurance policies.3
According to a new workplace study by Aflac, one-third of employees think supplemental insurance is more important now than they did before the pandemic. Nearly 50% (including 63% of millennials) have purchased at least one new benefit — life insurance, critical illness insurance or mental health resources — due to the pandemic. Just because we may survive this pandemic doesn’t mean we won’t suffer from its effects. In the past year, one-third of America’s workforce reported that the wear and tear on their mental health has impacted their job performance.4
In 2020, life insurance policies paid out over $90 billion, which was more than a 15% increase over the prior year. That was the largest year-over-year increase since the influenza pandemic of 1918. Perhaps the silver lining is that with more people facing the reality of their own mortality, more have been actively purchasing life insurance. The industry sold more than 43 million policies in 2020, representing a record $3.3 trillion in life insurance coverage.5