The outbreak of coronavirus (COVID-19) has closed schools, restaurants, sports leagues, theme parks and caused Americans to rush out and buy cleaners, soap and necessities. While you’re sitting at home, coronavirus may even have you thinking about something that isn’t pleasant -- your mortality.

Michael Schmidt, CEO of Diabetes Life Solutions, said there has been a “tremendous uptick” in new life insurance applications over the past two weeks. 

However, a new survey of 504 people found that most Americans aren’t thinking about life insurance or long-term disability insurance at the moment. Only 4% of respondents are considering buying new or more life insurance. Just 3% said they’re thinking about buying new or more long-term disability insurance. Not having either coverage could be a mistake. 

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“The coronavirus certainly can cause you to think about your plan, as there is no cure at the moment, which draws concern to folks without a plan in place. However, the virus is no different from any other health scare or accident -- cancer, heart attack, car crash -- all these events will prompt you to rethink your plan and get coverage in place,” said Jim Kirk, financial advisor, Rocky Mountain Financial Solutions. 

A new LIMRA study of 47 American and 12 Canadian life insurers found that life insurance applications didn't change much in March. However, how people are getting coverage has changed. 

While one-third of companies said they experience less face-to-face applications, one-quarter said they've seen more online applications in March. 

LIMRA also found more than one-quarter of U.S. life insurance companies expanded automated underwriting practices. 

Coronavirus exclusions?

Jake Tamarkin, co-founder and CEO of Everyday Life, said life insurers are beginning to consider the virus’ risk in their underwriting. He added that many leading insurers aren’t accepting applications for people who’ve recently traveled to China, Korea, Italy and other coronavirus hotspots. 

“If you have recently traveled to a high-risk zone, then it might be more difficult to buy, though there may be some insurers who haven't caught up yet,” Tamarkin said. 

In its study, LIMRA said they've added questions about "COVID-19 exposure and travel to the underwriting process, are now requiring good health statements, accepting electronic health records and are allowing historical exam and lab data in place of an exam. A small percentage of carriers are implementing face amount and premium limits for new coverage."

Ty Stewart, CEO and president, Simple Life Insure, said some life insurance policies exclude epidemics, including coronavirus. He added that the SARS epidemic in 2002-03 made insurers more cautious. 

“Always double and triple check the fine print before you buy,” Stewart said. 

Choice Mutual, an independent insurance agency, said an exclusion rider could include a line in the policy saying the insurance doesn't cover any claim resulting from: 

  • Coronavirus disease (COVID-19)
  • Severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2)
  • Any mutation or variation of SARS-CoV-2

    Choice Mutual said exclusion riders involving coronavirus could be an industry standard "if the morbidity rate causes carriers to experience detrimental financial losses due to an unexpected and unsustainable claims rate."

    If you plan on traveling, John Fisher, founder of Best Life Rates, said life insurers may postpone approval rather than deny an application. 

    “It's not a decline, but rather postpone, and more than one underwriter has mentioned a 30-day period upon returning where the applicant must be able to prove a negative test,” Fisher said. 

    You may be tempted to lie on your application. That’s a mistake. 

    “If you are found to have lied in your application, the insurer will deny your beneficiary's claim. So it is incredibly important not to lie on your application. Doing so is very shortsighted -- maybe it saves you a few bucks now, but what peace of mind does it give you to know that your insurer can deny your family in their hour of need?” Tamarkin said. 

    Applying for a life insurance policy

    If you need a life insurance policy, Kirk recommended getting one before you get sick. 

    “Complete an application while you are healthy. If you wait and contract illness, the insurance companies will review your medical records and may have hesitation to approve your policy at the preferred rating. Worse yet, hospitalization or death could seriously impact your chances of an approved policy,” Kirk said. 

    If you have pre-existing conditions, such as diabetes or a heart issue, you may need to go through an underwriting process that lasts more than a month. Traveling to countries with the coronavirus can also cause a delay in your application. 

    “What many people do not realize, especially for those who have diabetes or other chronic diseases, their application process may take three to four weeks,” Schmidt said. He added that the coronavirus’ spread is forcing employees to work from home, which may mean an even further delay -- up to six to eight weeks. 

    Life insurance underwriting processes aren’t always lengthy, though. Stewart said some insurers have “fast-track underwriting that uses artificial intelligence rather than medicals and interviews to produce instant quotes and cover.”

    It all goes back to your risk. The riskier you are, the longer the process. 

    “Ultimately, the insurance companies are looking at the applicant and asking the question, how big of a risk is this person?” Kirk said. 

    Some life insurers have started to limit new applications for people considered high risk. A handful of major insurers are suspending applications for people in their 60s with health issues, such as asthma or diabetes. Others have stopped taking new applications from seniors. 

    Choice Mutual said life insurers are doing this to "prevent them from creating a block of business that would result in a loss with the potential to jeopardize the profitability of an entire line of business." 

    Life insurance payouts for people with coronavirus

    Life insurers may limit policies and won't give you a policy if you have the coronavirus. 

    However, if you have an existing policy, the virus won't affect death benefits. Choice Mutual said existing policies will provide the same benefits regardless of whether you die from the virus if you have a policy. 

    Types of life insurance

    There are two overarching types of life insurance: term and permanent life insurance, including whole life

    Here are the differences:

    Term lifePermanent life
    Length of timeTerm life is for a limited time -- usually between 10 to 30 yearsLasts your whole life
    PremiumsOften less expensive with higher death benefitUsually more expensive
    Cash valueNo cash valueAccumulates cash value so you can tap into the policy while you're alive if needed
    Conversion optionTerm life policies often let policyholders convert to permanent lifeYou can't convert from permanent life to term life

    Which type of life insurance policy is right for you depends on your situation and what you want from a policy. A permanent life policy could be a wise decision if:

    • You definitely need a death benefit, such as money for a child who needs long-term care.
    • You want the ability to tap into a policy while you’re still alive.
    • You don’t mind paying more for coverage to guarantee that your loved ones will get a death benefit.

    A term life policy might be better if:

    • You want the most coverage for the fewest dollars. 
    • You want to pay off a mortgage or debts.
    • You don’t mind your loved ones possibly not getting a death benefit if you outlive your policy.

    Guaranteed and simplified life insurance

    A normal life insurance underwriting process includes a review of your medical history and a medical exam. However, there are two options to get a life insurance policy immediately or close to it -- a guaranteed plan or a simplified life insurance policy. 

    Here are the differences: 

    • A guaranteed plan gives you a policy without a medical exam. You also don’t have to provide information about your health history. 
    • A simplified issue policy doesn't require a medical exam, but you’ll answer health questions. The life insurer will also likely check your history using insurance databases. 

    These policies cost more than a regular life insurance policy. An insurer is taking on a higher risk by not having your health history or conducting an exam. Hence, the higher rates. 

    However, these policies may be the only option for people with health conditions. If you’re healthy though, going through a normal life insurance underwriting process might make more sense. 

    People with coronavirus likely won't be able to find a regular life insurance policy. In that case, they're only option might be a guaranteed policy. However, those policies usually have a waiting period before benefits kick in. So, if you were to die from the virus or for any other reason during that period, your loved ones won't get a payout. 

    Rob Drury, executive director of Association of Christian Financial Advisors, recommended avoiding a guaranteed or simplified issue policy unless you think you’d get declined coverage otherwise. 

    “Underwritten policies will bind contingent coverage at the time of application, provided the first month's premium is submitted with the application. The death benefit will be paid even if death occurs before the issuing of the policy unless it is confirmed that one's health condition at the time of application would have resulted in a declination,” Drury said. 

    Tamarkin said many online term life insurance options can also give quick decisions without going the guaranteed or simplified issue route. 

    “There is a whole new generation of online life insurance that is much more cost-effective than the simplified issue and guaranteed acceptance products that offer convenience but at a huge cost and therefore, I cannot recommend,” Tamarkin said. 

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    Group life insurance

    Another option is group life insurance through an employer or group. These policies are often free or low-cost. They also usually don’t require you to take a medical exam or provide health history to join. Those are the pluses. 

    The drawbacks are that they usually provide lower death benefits and you’ll lose coverage if you change jobs. 

    That said, a group life insurance plan can supplement an individual life insurance policy or can help somewhat if you don’t have any life coverage. 

    Check with your employer’s benefits department and your groups. You may find that you’re already enrolled in a group policy.