COVID-19 Survivor? Here Is How It Could Affect Your Life Insurance
COVID-19 upended the world in 2020. So it’s no surprise that the severity of the disease has people contemplating their mortality, however uncomfortable.
Unfortunately, COVID is impacting life insurance companies, and the future regarding COVID and life insurance is uncertain.
Here’s how your life insurance policy (or potential policy) will be affected during COVID.
If you already have life insurance…
There’s some good news if you already have life insurance.
Your current policy shouldn’t be impacted
Life insurance companies can’t add riders to address COVID after the policy has been issued. As long as you had your policy finalized before COVID-19 was a thing, it shouldn’t mention anything about COVID. That means COVID shouldn’t directly impact these policies.
Your beneficiaries will still receive a payout if you die due to coronavirus while insured under your current policy. Of course, you still have to follow all of the other rules within your policy to qualify for the payout.
You might have to deal with COVID’s impacts in other ways, though
Even if you already have life insurance, you could be impacted in a few ways.
You may realize you need more coverage
Many people purchase life insurance when they’re young. Or you may have just gotten married when you bought your $400,000 policy. That was more than enough coverage at the time. Then, life continues on. Unfortunately, many people don’t check to see if they need new life insurance along the way.
Coronavirus has made it clear that unexpected sickness could cause you to pass away. If you haven’t considered life insurance coverage lately, you may have realized you don’t have enough. In the example above, the family may have had two children since they got married. They likely moved up the career ladder, make more money, and now spend more money, too.
Now, the family has higher expenses today and in the future to care for those kids and put them through college. The $400,000 life insurance policy is not likely anywhere near enough to cover the expenses necessary if they die.
Experts often recommend having about 10 times your salary in life insurance coverage. If this rule of thumb works for the example family and they make $100,000 per year now, they need $1,000,000 in total coverage. That’s $600,000 more than they currently have.
Your policy might expire before your need for life insurance disappears
Your term life insurance policy will eventually expire. Most people plan to no longer need life insurance after their policy expires. They hope to build up enough assets to be self-insured. Things don’t always go according to plan, though. You may need to pick up another policy.
This may not seem like a COVID problem, but it can be down the road. Let’s say insurers decide people with COVID are more likely to die early. If you got COVID and need another policy after yours expires, you may not be able to get one, or it could be more expensive. (But more on this below).
If you need to purchase life insurance…
People purchasing life insurance policies now or in the future have more to worry about. The final impacts of coronavirus on the life insurance process are still unknown. However, changes are starting to show.
It may take longer to secure a life insurance policy
Initially, when the pandemic started, it took longer to get life insurance after applying. Policies that required medical exams had to figure out how to administer the exams safely. People that were putting off buying life insurance may have suddenly felt the urge to protect their family, resulting in more applications.
During this period, people were working from home so the processors were adjusting, too. Any policies in the process took longer to go through the usual system due to these inefficiencies. This started a backlog. Most life insurance companies should be through that backlog by now, but the whole process is not as efficient as it once was due to coronavirus precautions.
Thankfully, some life insurance companies are speeding up the life insurance process. For instance, Bestow can issue a policy and make it active within minutes because you don’t have to take a medical exam. Instead, they use data from your medical history to make a decision. These types of policies generally cost more than those that use medical exams, though.
The application process may change
The application process may now include questions about your coronavirus history. Medically underwritten policies will look for signs of COVID in your medical information. While it’d be ideal if coronavirus never happened, life insurers can’t ignore data that could lead to increased risk on their end.
You may have to wait to get a life insurance policy, too. Suppose you’re recently returning from a coronavirus hot spot. In that case, the insurer may not offer you a policy until you’ve waited through a waiting period to make sure you didn’t catch the virus. For this reason, it’s essential to find a life insurance company that fits your lifestyle. Sproutt specializes in this and may be able to help you find a policy that fits your traveling and other lifestyle needs.
Life insurers didn’t know what to expect with coronavirus just like we didn’t. They still don’t know the long-term impacts of having coronavirus may cause. As these effects are figured out, expect more changes in the life insurance process.
The insurers may dig for information about the severity of your COVID-19 case. They may need to know whether you were hospitalized or asymptomatic. If you had a severe coronavirus case, it may make sense to get a policy before insurers know more about the long-term impacts, if any exist.
Your rates could be impacted by COVID
Uncertainties create problems for life insurance companies. Life insurers like predictability to set rates that are affordable yet still allow them to make a profit. Now, life insurers have to be more careful than ever to continue staying profitable due to the uncertainties surrounding COVID-19.
Ultimately, this means coronavirus may impact the cost of a life insurance policy in the future. If your policy is medically underwritten, which many are, having COVID could potentially increase your rates. The exact impact will be determined over the years and decades to come as we see how coronavirus affects people’s longevity.
In the short term, insurers may have to raise rates anyway to protect against the impact of unexpected COVID claims. If more claims are being paid out than premiums being taken in, new policies might be forced to make up this difference.
You may get denied coverage
Having coronavirus in the past could potentially be a cause for a life insurance company denying you coverage. The laws of what is allowed vary by state so this may not be an issue yet. As insurers learn more about the long-term effects on a person’s life span, this could change.
Think about it this way. An insurer currently may be willing to issue a 20-year term life insurance policy to a 40-year-old person because their life expectancy dramatically exceeds 60 years. This means there is a good chance they won’t have to pay out the policy.
Let’s say today we suddenly get complete information about how coronavirus impacts longevity. Insurers now know that a 40-year-old had a severe coronavirus case that required hospitalization. Now, that 40-year-old’s life expectancy has been reduced. According to the new information, there is a good chance they die by the time they turn 55. Life insurers would not likely risk taking on that person because there is a good chance they’ll have to pay out the death benefit.
Obviously, we don’t know this information yet. The above is purely an example and not based on any sort of fact. It does show you how life insurers may use new information they discover, though.
The future is still uncertain
All of this is speculation. No one knows what the future holds for sure. You can only monitor the changes currently happening to see how coronavirus impacts life insurance. If you’ve contracted coronavirus and feel it may affect your chances of getting life insurance or your rates in the future, it’s probably better to get insurance sooner rather than later.
If things improve, you can always get a new life insurance policy. You can’t go back in time to get a life insurance policy if life insurance rates go up more or further information about the virus comes out that would result in you getting denied for coverage.
If you already had life insurance in place before coronavirus and don’t need to add more coverage now or in the future, nothing should change for you. Your policy will continue as usual and, should you die from coronavirus or any other covered reason, your policy should payout to your beneficiaries.
If you’re about to start the life insurance process, know that things have changed. You’ll likely be asked about your COVID history. Even if you aren’t, life insurers may look for evidence of it in your medical underwriting or medical exam.
Having coronavirus in the past may put you in a higher risk category which results in higher rates. It could even result in a denial if you have other major health issues.
The future is largely unknown, though. Coronavirus is still relatively new. If you need more life insurance, consider applying today before insurance companies have a chance to change their underwriting should there be more concerns about coronavirus’s impact on your lifespan in the future.