Updated: Aug 9, 2020, 8:03am Amy Danise
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The pandemic got a lot of people thinking
about how to increase the financial security of their families, now and in the
future. And life insurance moved to the top of many to-do lists.
A survey conducted in May and June 2020 by
Life Happens, an industry-funded education group, found that 67% of Americans
say that the pandemic has been a wake-up call for them to examine their
finances. And 30% say that life insurance has been one of the top topics for
dinner table discussion.
“It’s unfortunate it takes an event like
this to remind us that we’re all mortal and just one unforeseen event away from
needing that policy. Things happen—accidents happen, pandemics happen—and it’s
important we are protected,” says Brooks Tingle, president and CEO of John
Hancock Insurance.
Whether you’ve been putting off buying life
insurance for years or it has suddenly hit your radar, there’s never a bad time
to make a financial plan and lock in coverage. Life insurance companies and
agencies quickly implemented plans to work around the hurdles of the pandemic,
while at the same time handling an increase in applications.
“COVID-19 has highlighted how important
planning for the unexpected really is,” says Aaron Ball, senior vice president
and head of insurance solutions at New York Life. “Although more people might
be more focused on buying life insurance as a result of this situation, we
expect that the importance of building in a cushion—whether that is an
emergency fund, adequate insurance or other mechanisms for protection within a
financial plan—will resonate with consumers well beyond what is a hopefully a
relatively short period of uncertainty.”
Related: Best Life
Insurance Companies Of 2020
Life Insurance Buying During the Pandemic
If you’re wondering if the pandemic is a
good time to be buying life insurance, it is. In fact, because some companies
have started raising prices, now is the time to snag a good rate before prices
are higher across the board.
It’s also a prime time to make an
application that won’t require a medical exam. In the past, buying a no-exam
policy usually meant paying more because the insurer had less information on
you to assess their “risk” in selling you a policy.
“The labs, doctors’ visits, documentation
and in-person meetings made the whole experience lengthy and cumbersome,’ says
Tingle of John Hancock. “The pandemic made all those steps impractical, if not
impossible.”
Even before the COVID-19 pandemic, many
insurers such as John Hancock had been working on ways to use data (such as
electronic health records and prescription databases) as a substitute for
medical exams and to digitalize the life insurance buying
experience.
Byron Udell, CEO of AccuQuote, a national
online life insurance agency, observes that many life insurers quickly adapted
by offering no-exam policies at prices comparable to policies that required an
exam. This is giving life insurance buyers more choices for coverage—without worrying
about how to get an in-person exam done. AccuQuote has seen a 20% to
30% uptick in life insurance applications.
You may still run into a medical exam
requirement if you’re looking for a large amount of coverage (in the millions)
or you’re older or have health issues.
You might not even know if you’ll be
required to do a medical exam until after you submit an application. This “is
what we call a ‘maybe no-exam’ process, as we never know, up front, whether the
exam will be waived,” says Udell. He says he’s been surprised at some of the
high policy amounts approved—and at the best rates—with the exam waived.
Some life insurance buyers will purchase
the maximum coverage they can get without an exam, even if they need more, says
Ryan Pinney of Pinney Insurance, a distributor of insurance and financial
products that specializes in digital sales, service, and support.
“Before the pandemic, our average
applicant’s age was over 44, and now it’s closer to 40,” says Pinney. “These
consumers believe they don’t need much coverage because they’re young and not
in their peak earning years yet. They’re taking action now because, in many
cases, they can get up to $1 million in coverage without an exam. That limit
becomes an artificial cap on what they’ll apply for.”
Whether life insurers will continue to
offer plentiful options for no-exam policies after the pandemic remains to be
seen. Udell predicts medical exams could make a comeback if insurers see higher
mortality (meaning claims) than they expected on policies that didn’t require a
medical exam.
“I suspect some companies will re-introduce
exams, at least optionally, even at lower face amounts, in exchange for the
possibility of an even lower rate,” says Udell.
Pinney also predicts that insurers will
start wanting more applicants to take medical exams after the pandemic. “The
mortality risk is too high to keep offering these policies at the current
prices,” says Pinney. “This means one of two things will happen: Either
insurance pricing will go up 5% to 10% over the course of the next year, or
carriers will reinstate requirements for medical exams.”
Tingle of John Hancock Insurance thinks
innovations that allow a shift away from medical exams will get traction.
“There is no question that COVID has accelerated a move toward a less invasive,
less burdensome and more timely purchase process. As an industry we can’t turn
back. Will there be a period when those traditional requirements resume? For
sure. But as far as the overall trends toward faster, easier ways to buy life
insurance, those have to continue at an accelerated pace,” he says.
The unexpected closing of one of the three
primary providers of life insurance
medical exams also caused some upheaval, notes Udell. In early
July, EMSI suddenly shut down and insurers had to scramble to get their
applicants rescheduled with other exam providers. (The other two large
providers are ExamOne and APPS-Portamedic.)
Pandemic Spurs Life Insurers to Ask Different
Questions
A typical life insurance application
includes dozens of questions about your health, prescriptions, family health
history, driving record and dangerous activities such as sky-diving. Since the
application process is all about the insurer “assessing risk,” COVID-19
questions quickly became a standard part of applications.
Have you been diagnosed with COVID? Has
someone in your household been diagnosed with COVID? “Yes” answers could lead
to a postponement of your application.
New concerns are emerging around applicants
who have had COVID-19. There’s uncertainty about how the virus affects a
person’s long-term health and life expectancy. Udell knows of at least one
insurer that will no longer offer the best rates (the “preferred” rate class)
to applicants who had COVID-19, even if they appear to have fully recovered.
“Whether this action is rational or
justified, no one yet knows,” says Udell.
International Travel Is Still a Concern
When the pandemic started, traveling
internationally was seen as one of the riskiest things you could do from a life
insurance buying perspective. Most life insurance companies instituted
postponements for applications until after the travel. Once you were back and
healthy, and after a certain period of time such as 30 days, the insurer would
consider your application.
Now, of course, traveling even to Florida
seems ill-advised, but domestic travel is not an application question.
Postponements for international travel remain common.
If you have plans for international travel
this year, expect a delay on a new life insurance policy for at least 30 days.
And that’s assuming you don’t have additional international travel plans.
Tips for Buying Life Insurance Now
If you’re ready to buy coverage, life
insurance companies are fully open for business. Here are some important
considerations.
Be prepared for potential delays due to the
pandemic: You may experience a delay in the application process if your
insurer wants to request medical records, as many doctors’ offices have reduced
staff for doing such tasks. If your application will require a medical exam,
you might also experience a delay, especially if you’re avoiding in-person
contact with strangers.
Now is the time to get in on good life
insurance prices: Many life insurance products are priced at all-time
lows, but the winds are shifting. Udell at AccuQuote has already seen dozens of
companies raising prices because of the low interest rates. Continued low
interest rates will put further pressure on insurers to raise rates in order to
compensate for lower investment gains.
“I would characterize today’s environment
as a “fire sale” of sorts,” says Udell. “I don’t believe we’ll see prices as
low as the prices that are still available for much longer. A year from now, I
am very confident that prices will be higher, across the board. Those that buy
coverage now will be happy they did.”
Take time to look at how much life
insurance you need as part of your bigger financial plan: It’s best to look
at life insurance as one of several players in your family financial strategy.
Seeing it as part of the bigger plan can affect how much you decide to buy, and
what type of life insurance to choose.
“While applying for life insurance has
become easier than ever, figuring out how much insurance you need and the role
that insurance plays as part of your overall financial strategy can be much
more challenging,” says Ball of New York Life. “Navigating this with the help
of a trusted financial professional can ensure your family’s needs will be
covered.”
Tingle of John Hancock says, “My advice is:
Have life insurance because things happen. We take the matter of paying claims
very personally and having the opportunity to see so many stories and the
people behind the claims, you are reminded of all that can happen in life.
People get ill unexpectedly. They have accidents. We’ve had situations where
husbands and wives have died within days of one another. Many people we’ve seen
pass away of COVID-19 did not have life insurance. So, my bottom line message
is, please, have life insurance.”
https://www.forbes.com/advisor/life-insurance/buying-during-pandemic/
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