How Is the Coronavirus Affecting Life Insurance?

Coronavirus has affected nearly every aspect of our lives. For some people, unfortunately, the pandemic has affected life itself. With the impact of the pandemic, many people are considering steps they should take to ensure that their family has long-term stability. Life insurance is often a good solution, but how is the coronavirus affecting life insurance? Let’s take a closer look.

Current Policies Likely Not Affected

Some people worry that their current life insurance policies could be affected by the coronavirus pandemic. What would happen if they were to succumb to COVID-19? Or, what happens if a loved one who had an insurance policy has already succumbed to the virus?

In most cases, death due to COVID-19 would be covered under life insurance policies. The coronavirus likely wasn’t specifically listed as an exclusion on most life insurance policies. It’s also likely that death due to a pandemic wasn’t listed, either. This means that anyone who had a life insurance policy in place before the pandemic and then dies as a result of COVID-19 would still likely be covered under that policy.

Claims Have Increased

Life insurance companies paid out significantly more claims as the pandemic wore on. According to a report compiled by insurance broker Howden, life insurance companies around the globe paid out $5.5 billion in claims in just the first nine months of 2021. For all of 2020, that number was $3.5 billion.

The main reason for the vast increase in life insurance payouts was the Delta variant of COVID-19. That variant was more transmissible and more deadly than previous strains of the coronavirus. The United States experienced the largest increase in life insurance claims.

This spike in claims followed a surge during the first few months of the pandemic in the U.S., when the American population experienced 12% more deaths than the typical average, according to LIMRA, the trade association for life insurance companies.

Life insurance companies as a whole are expecting these numbers to continue to drop as vaccines become more widespread, and as the pandemic eventually begins to wane.

Higher Premiums Could Come

It’s possible that premiums for all life insurance policies could increase in the future due to the pandemic. Whether a policyholder contracted COVID-19 or not, they could be subject to higher rates for any new life insurance policy they take.

Part of the reason is the drastic increase in payouts insurance companies have experienced during the pandemic. The spike in death benefits paid out may have exceeded the total amount of premiums a company was collecting, meaning it would eat into their capital.

To overcome that deficit, companies may need to resort to increased premiums across the board for all life insurance policies. That being said, there is a lot of competition in the life insurance market, which could result in those higher premiums being capped if they rise at all.

New Policies Could Be Affected

Insurance companies must now consider a new risk when assessing life insurance applications: whether someone has been infected with COVID-19, and whether they would be considered high risk.

Risk assessments are nothing new to life insurance policies. Every insurance company conducts a risk assessment for all new applications, as it helps them set the premium for the policies. Before the pandemic, COVID-19 wasn’t something insurance companies had to concern themselves with, but it is now.

If you’ve contracting COVID-19, the insurance company may deem you a higher risk than if you hadn’t. But, since there isn’t a lot of good data about the long-term effects the coronavirus has on a person, there isn’t a tried-and-true standard by which insurance companies can follow. As a result, it is handled on a case-by-case basis. Just because you contracted COVID-19 doesn’t mean your rates will be higher. It will simply be taken into considerations with all of your other medical information and risk factors.

Applications Could Be Delayed

Some insurance companies are taking a cautious approach to underwriting new life insurance policies during the pandemic. If you’ve contracted coronavirus, for example, the insurance company may delay your application for a new policy until you’re 30 or 90 days recovered from the virus.

Your application could also be delayed if you’ve been deemed a close contact to a person who tested positive, or if you’re traveling or plan to travel in the near future.

The important thing for people to remember is to be upfront and honest with your insurance company. It’s better to disclose close contacts with people who test positive for COVID-19 or if you plan to travel. You don’t want to be surprised down the line if your beneficiaries have challenges filing a life insurance claim.

Work with an Insurance Marketing Organization

As a leading Insurance Marketing Organization (IMO), Good Life Insurance Associates (GLIA) provides a full range of insurance products, back-office services, and tools to support your individual clients’ wants and needs. We provide financial advisors and insurance agents in our network across the country with access to a full range of premium carriers, expert support services, and an industry-leading compensation plan.

The GLIA Advantage