Among the many effects of the COVID-19 pandemic is an acute awareness of one’s mortality. Given the circumstances, it is natural to worry about what would happen to those closest to us if we were no longer here. As such, many clients have called to discuss life insurance—some want new policies, some want more coverage and others want to make sure their existing portfolio is in good standing. In an effort to provide clients, and their professional advisors, with the most pertinent information, here are the answers to some common questions about how the current health crisis is, and isn’t, impacting the life insurance marketplace.
1. Will my life insurance cover me or loved ones if I succumb to COVID-19?
2. Is it possible to obtain a new life insurance policy now?
Yes, and in fact we are working every day to get people covered—not just to protect individual family members but also against the loss of key individuals in their businesses.
However, we are seeing some limitations to new coverage, particularly for older individuals: most carriers have stopped issuing new policies for anyone over the age of 80; some have limited or stopped issuing policies to those who are 70 and older; and some are limiting coverage for those who are 60 and older with pre-existing conditions.
Another potential issue is foreign travel. Even in pre-pandemic times, carriers would always ask clients about plans to go abroad. It is no surprise that right now we are seeing them refuse policies to those with plane tickets abroad.
3. Can I obtain a new policy if I have tested positive for COVID-19?
Yes, but not until you are symptom free for a prescribed period of time—generally 30 days but that can vary slightly. Once you have cleared that hurdle, though, your bout with the virus will have no effect on your obtaining a new policy.
4. Will I need an in-person medical exam to get new coverage?
The coronavirus spurred innovations in underwriting that carriers had discussed but failed to act on for years. Many are now willing to forgo an in-person medical exam for most policies under $3 million (and for some as high as $5 million). Instead, carriers are relying on data analytics and doctor’s medical records. In fact, because many doctors’ offices are also impacted by the pandemic, carriers are now accepting reports from recently completed physical examinations, which they access by logging onto existing patient portals (with the patient’s approval, of course).
5. Is life insurance more expensive now?
No—and yes. Because the great majority of tragic deaths from COVID-19 are among the elderly, carriers are not worried about an increased mortality among the insurance pool. So, in that sense, pricing is not rising due to COVID-19.
That said, the coronavirus has put pressure on the economy, which the Federal Reserve has responded to by bottoming out interest rates. That has affected carriers’ investment returns, so premiums for some policies are, in fact, increasing. But, so far, only for some, which is why this is a good time to explore policies.
6. How do I know if I have enough coverage, or if what I have is in good standing?
Call your insurance broker! We will make sure everything is in order, and review the amount, the termination date (if relevant), and any change in your concerns, needs or beneficiaries. One client, who is married with three children, recently realized her brother was her beneficiary instead of her husband! If you decide you need additional coverage, we will explore new policies rather than amending your current one, because that is generally less costly.
7. If I’m experiencing financial hardship, can I take advantage of the government-mandated grace periods for payment?
This is tricky—life insurance carriers are following the guidelines, but in some cases delayed payment will mean a lag in coverage, and that may not be in your best interest. Additionally, if you pass the grace period, most carriers will offer the option to reinstate, but you may have to fill out a health questionnaire to do so, and obviously someone fighting COVID-19 would not qualify. It is all about the fine print, so please give us a call before deciding to delay payment.
8. Can I use my life insurance to access cash?
Some policies have cash value, and we certainly have clients who are opting to let their cash value pay their premiums. But you need to make sure you understand exactly how that will affect your policy going forward, since doing this can be disruptive. Some policies require that the insured pay every premium, while others are more flexible. Discuss the fine print with your insurance professional before taking this step.
We understand that this is a challenging and worrisome time for everyone. If we can help provide peace of mind by reviewing your existing life insurance policies or exploring new options, please reach out to us. It would be our privilege to assist you at this moment.