Covid-19 and life insurance: What you need to know?

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Key Takeaways

Your life insurance policy doesn’t exclude Covid-19 or any other disease.
Getting the coronavirus vaccine won’t affect your life insurance application.
Most people who have had Covid-19 and recovered at home can apply for life insurance 30 days after the symptoms resolve.
Getting life insurance is easier than you think.

The outbreak of coronavirus (Covid-19) has had wide-ranging social and economic impacts on Americans. It’s changed how we work, travel, what we buy and how we shop, how we educate our children, the list goes on and on. On the other hand, the pandemic has prompted innovation in some industries that will have a positive effect. The life insurance industry is one of them.

How is the coronavirus (Covid-19) affecting life insurance?

Traditionally, the life insurance industry has responded to a public health crisis by making life insurance harder to buy.

The AIDS crisis of the late-’80s and early’90s prompted life insurance companies to require most applicants to submit blood and urine samples. More tests were ordered and more paperwork was needed over time, eventually resulting in at best an unpleasant life insurance buying experience for the consumer.

Although life insurance companies have made progress over the years, the pandemic forced them to accelerate innovations and change the way consumers buy their products. Lockdowns and social distancing shut down the traditional way of doing business. Agents were no longer able to meet with clients to take applications, and physical examinations were no longer possible.

Covid-19 and life insurance applications

Jessica Caracofe, RN, vice president of underwriting at AgencyONE, says many clients weren’t willing to go to a facility or have an examiner go to their house for an exam as part of a life insurance application process. Insurers had to use other methods.

“Companies realized they had to find other ways to get medical information. Insurance companies responded by relying more on reports from the client’s physician and other third-party medical database reports to satisfy exam requirements and approve policies,” Caracofe says.

Covid-19 and consumer attitudes

Life insurance ownership has been on a steady decline for years, but the COVID-19 pandemic changed consumer attitudes about life insurance.

Life Insurance Marketing Research Association (LIMRA) estimated that only 54% of Americans had life insurance in 2020, down from 63% in 2010. That seems to be changing.

Gonzalo Garcia, a partner at AgencyONE, says life insurance sales were about the same at the start of the pandemic.

However, Garcia noticed more interest during 2020 and into 2021.

“Insurance sales have gone back to the basics,” Garcia says. “There has been a heightened awareness around the need for basic planning as a result of the pandemic. Couples are realizing that people are getting sick, they have a mortgage, kids. They’re concerned about planning in case something happens to one of them. That’s why we have seen a huge increase in the number of applications for $500,000 to $1,000,000 of life insurance, almost 200% for some companies.”

A recent study by LIMRA confirms this trend.

LIMRA Consumer Sentiment Study reported 6 in 10 Americans say they had a heightened awareness of the value of life insurance because of COVID.
The LIMRA Insurance Barometer study results show that 31% of Americans say they are more likely to buy life insurance due to Covid-19.

Mortality trends, pandemics and life insurance

The worst consequences in terms of mortality may be behind us. So while the mortality ‘level’ certainly was affected by the pandemic, the future ‘trend’ may not be.

Daniel Bauer

Professor – Risk and Insurance
University of Wisconsin-Madison, Madison, WI

Daniel “Dani” Bauer, professor of risk and insurance at the Wisconsin School of Business at University of Wisconsin-Madison, says it remains unclear whether and how the trend of mortality will be affected by Covid-19.

“Assuming and hoping that the situation will improve,” he says, “that vaccines will be able to address potential mutations and that we will get better at treating Covid-19, the worst consequences in terms of mortality may be behind us. So while the mortality ‘level’ certainly was affected by the pandemic, the future ‘trend’ may not be.”

Since Covid-19 was particularly dangerous for the elderly population and those with pre-existing conditions, Bauer maintains that the consequences on aggregate mortality weren’t as grave as previous pandemics. As referenced in his 2015 paper, The Risk of a Mortality Catastrophe, during the 1918 Spanish flu, mortality probabilities for 20 year olds doubled and were close to 1% (which is 1 in 100 20-year-olds dying).

“The experience from Covid-19 was not like that,” he explains. “However, the point that my paper makes is that pandemics and similar events that have an abnormal effect on human mortality (wars, etc.) are a continuous threat, and given their infrequency, it is easy to forget that (or to portray that in today’s world, pandemics are less likely)…So, I believe consumers should integrate this into their decisions of whether and how to protect their families.”

What if don’t have life insurance? Can I get it during the pandemic?

Yes, for most people who recovered at home, life insurance companies will offer coverage 30 days after the symptoms have resolved. There will be no effect just because you had Covid-19.

If you were hospitalized, the insurance company will want to wait 60 days to six months after recovery before considering your application, depending on the severity and treatment of the illness.

Life insurance companies will base life insurance rates on the residual effect of the illness rather than Covid-19 itself.

Does life insurance cover Covid-19?

Yes, life insurance companies can’t deny a claim because of Covid-19. There are no pandemic exclusions.

Life insurance policies usually only contain one exclusion — suicide.

However, all life insurance policies have a provision called incontestability. The life insurance company can’t deny a claim for any reason after the policy has been in force for two years, including suicide, unless you commit fraud.

Does the coronavirus vaccine affect life insurance?

Getting the Covid-19 vaccine doesn’t invalidate or affect a life insurance company’s decision to offer coverage.

As a result of a rumour circulating on social media, the insurance commissioners of New York, Pennsylvania and other states have issued statements reassuring consumers of that fact.

In fact, one life insurance company, John Hancock, actually rewards policyholders who participate in the Vitality healthy lifestyle program for getting the vaccine.

How to apply for life insurance?

If you’re between the ages of 18 and 60, healthy and applying for less than $1 million of coverage, you usually won’t have to submit to an exam or lab work.

The process is simple. Your agent will help you fill out an online application. The insurance company will schedule a telephone interview to complete the application process.

Here’s the information you should have ready:

Personal information

Social Security Number
Drivers license and details of moving violations
Employment information
Income and net worth
Details of any existing life insurance coverage

Health and lifestyle information

Names and addresses of any physicians that you have seen recently
Information about your medications and dosages
Details of surgeries, treatments, hospitalizations and illnesses
Family medical history of heart disease and cancer
Alcohol, tobacco and recreational drug use
Exercise and high-risk sports

At the end of the interview, you’ll be asked to provide an electronic or voice signature.

If you’re applying for larger amounts or have pre-existing conditions like diabetes or heart disease, you should discuss them with your agent. They’ll be able to help you get the best outcome for your circumstances.

Types of life insurance

You have multiple life insurance options. There are two basic types of life insurance: term and permanent life insurance, which includes whole life and universal life.

Here are the differences:

	Term life	Permanent life
Length of time	Term life is for a limited time — usually between 10 to 30 years	Lasts your whole life
Premiums	Often less expensive with higher death benefit	Usually more expensive
Cash value	No cash value	Accumulates cash value so you can tap into the policy while you’re alive if needed
Conversion option	Term life policies often let policyholders convert to permanent life	You 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. Let’s look more into the differences.

What is term life insurance?

Term life insurance is for a limited period of time. Term life insurance policies are usually between five and 30 years.

Term policies are usually cheaper than whole life insurance. Policyholders can outlive a term life insurance policy, so there’s no guarantee that a life insurance policy will have to pay a death benefit on term life.

Term insurance policies can have a level premium or you may get a policy in which the rates increase as you age.

You can often convert a term policy to permanent coverage. You may decide to convert to perm if you’re approaching the end of a term life insurance policy.

A term life policy might be better if:

You need a lot of coverage for a limited budget.
You want to cover for a mortgage or debt.
You don’t need the coverage after the policy expires.

What is whole life insurance?

Whole life insurance is a type of permanent life insurance. A whole life policy is for life as long as you pay your premiums.

A whole life policy has cash value. Cash value lets you tap into the policy during your lifetime.

Whole life also offers more rider opportunities. Riders can be added to a policy to provide additional protection. Some of the most popular whole life insurance riders include:

Long-term care rider
Accidental death rider
Return of premium rider

A permanent insurance policy, such as whole life insurance, could be a wise decision if:

You need the life insurance benefit for more than 10 years. For example, if you plan on leaving a legacy or provide funds for a special needs child.
You want to take advantage of the tax-advantaged cash value.
You want to include long-term care and critical illness coverage.

What is final expense insurance?

For people who can’t get life insurance because of health issues, final expense insurance may be the only option. Final expense insurance is available in small amounts, typically $5,000 to $100,000.

It comes in two forms — a guaranteed issue or a simplified issue 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 an underwritten life insurance policy. They may also have a “graded benefit.” That means in the first two years, the insurance company will only pay a death benefit of premiums paid plus interest.

Most people can get better coverage with fully underwritten life insurance. Final expense coverage is a last resort.

Group life insurance is another way to get a life insurance policy

Another option is group life insurance through an employer or association. Some employers pay for term coverage up to a multiple of salary.

They may also offer voluntary group universal life. These policies usually don’t require a medical exam or health history to join.

A group life plan can offer basic coverage or supplement your individual life insurance. Check with your employer’s benefits department and your groups. You may find that you’re already enrolled in a group policy.

How much does life insurance cost?

The cost of life insurance varies depending on multiple factors, including:

Type of policy
Age and health of person
Length of policy if it’s a term life policy
Death benefit

Here are the average rates by age, health status and smoking status for multiple ages for term life insurance:

Health profile and level term length	Age 30	Age 40	Age 50	Age 60
Female non-smoker 10-year term	$224	$307	$575	$1,190
Female non-smoker 20-year term	$316	$480	$961	$2,323
Female non-smoker 30-year term	$432	$697	$1,541	$7,300*
Female smoker 10-year term	$439	$693	$1,487	$3,088
Female smoker 20-year term	$672	$1,190	$2,393	$5,243
Female smoker 30-year term	$915	$1,655	$3,700	$13,030*
Male non-smoker 10-year term	$264	$359	$737	$1,722
Male non-smoker 20-year term	$370	$568	$1,231	$3,154
Male non-smoker 30-year term	$530	$877	$2,027	$7,300*
Male smoker 10-year term	$554	$865	$1,968	$4,423
Male smoker 20-year term	$828	$1,492	$3,179	$7,113
Male smoker 30-year term	$1,171	$2,155	$4,519	$13,030*

*Limited quotes available. Data source: Compulife Quotation System as of December 2020.

It’s a good idea to get multiple term life insurance quotes when you’re shopping for a policy. Life insurance companies gauge applicants’ risk differently. One life insurance provider may consider you a low risk, while another might charge you higher rates.

So, it’s vital that you get life insurance quotes from multiple term life insurance companies.

The same is true for permanent life insurance. Get quotes from more than one whole life insurance companies to make sure you get the best deal on your life insurance policy.