How COVID-19 Has Affected Your Life Insurance Policy?

Thang Truong
Thang Truong
Updated on:

As COVID-19 has spread throughout the world, it’s had a big impact on people’s lives and the economy. On a personal level, many people were forced to stay home to prevent the spread of Coronavirus, and some have developed severe symptoms after being infected. As of April 8th, 2020, there were approximately 82,000 deaths worldwide from confirmed COVID-19 infections. Over a million people have caught this virus. Both of these numbers are expected to continue rising in the coming months. 

In these challenging times, people are looking at ways they can prepare for the future. Many are considering life insurance, or have life insurance and want to be sure they will continue to be covered. 

Does Life Insurance Cover Death Due to COVID-19? 

There is no need to worry just yet. Death from illnesses like COVID-19 are covered by most life insurance policies. If you or a loved one passes away from this infection, the insurance company will pay the death benefit on your life insurance policy.

You should be aware that there are some exceptions:

  • Accidental death and dismemberment policies won’t cover illness-related deaths.
  • Insurance companies may not pay up if your policy payments were late at time of death. However, if you pass away during the grace period of the policy, the insurance company will still pay death benefit to your beneficiaries.
  • If the policyholder lied on their initial application, such as purposely putting a lower weight or not disclosing the overseas future travel plans, or not mentioning a health condition, the insurance company can deny payment.

How COVID-19 Affects People Currently in the Process of Buying Life Insurance? 

Most insurance companies are still selling policies right now. The approval process is modified from what companies have required before, but applicants can still get insurance coverage. Life insurance providers are mostly pushing products that don’t require a medical exam. These can include: 

Learn more about How No Medical Exam Life Insurance Works

If you do want a policy that requires medical underwriting such as whole life or indexed universal life or variable universal life, companies are offering time extensions to applicants, usually up to 180 days. In the meantime, these applicants can get approved for a limited amount of coverage. 

The life insurance companies that are moving away from medical exams have started relying more on medical histories. Applications for these insurance policies will include medical questions that applicants must answer, and a request for permission to access your medical records for approval. Essentially, these life insurance companies will look at an applicant’s medical records and already diagnosed health conditions to determine risk, premium amounts, and whether to approve a policy.

New Questions to Answer

Insurance companies are also asking new questions on their applications. The insurer may want to know if you’ve traveled recently, where you went, and if you have COVID-19 symptoms or a diagnosis. If you are sick, it won’t necessarily rule out your getting approved. However, you may be asked to wait until you are fully recovered to complete the insurance process, or you could be limited to a certain amount of coverage. If you have traveled recently to an area with a lot of coronavirus cases, the insurance company may postpone coverage approval on your application for 30 days. 

What Will Happen to Life Insurance after COVID-19? 

While the economy is still in a holding pattern for most people, the insurance industry is working hard to figure out the long-term impact of COVID-19. It’s still too early to tell if this virus will result in permanent changes to life insurance coverage. For the foreseeable future, certain changes to policy applications, medical examinations, and the risk evaluation process have already occured.

Will Premiums Go Up?

Life insurance companies determine their rates based on how costly it is to provide coverage for all of their policyholders and on the quality of their investments. If they have a bad year with high claims requests or a poor stock market impacts their investments, then they may be forced to raise premiums for new customers and reduce dividend paid to existing whole life policies in the case of mutual insurance companies. If a lot of policyholders allow their policies to lapse through non-payment of premiums, the insurance company will also lose a lot of revenue in 2020. 

COVID-19 Mortality Rates Also Affect Premiums

Insurance underwriters are paying close attention to the data coming out of the COVID-19 pandemic. It’s still early stages, so insurance companies won’t know the overall risks of covering someone in a part of the world with high COVID-19 infection rates for certain. If people have a higher risk of catching COVID-19 and dying from it because of where they live or what demographic or age group they are in, their premiums will likely be higher than average.

How COVID-19 Affects Different Groups

As of March 3rd, the World Health Organization (WHO) estimated mortality rate from Coronavirus to be about 3.4% overall. However, this mortality rate has varied greatly as the virus spread throughout the world. In January, the WHO estimated mortality rate at about 2% during a press conference. Also in China, the initial mortality rate was much higher for diagnosed cases, about 17.5% from January 1st – 10th. But, over the months that passed the mortality rate dropped to .7% in China.

As of April 7th, new data in the United States also shows that some demographics are being hit harder by COVID-19. In Louisiana, over 70% of COVID-19 deaths have been African Americans, while they only make up about 32% of the local population. Similarly high mortality rates amongst blacks have also showed up in Washington DC, Illinois, and other states.

COVID-19 has also shown higher mortality rates among the elderly. For instance, those who are 80 years old or over have a roughly 20% mortality rate. Although, there have been deaths from coronavirus at all age groups.

COVID-19 has only been worldwide since about January 2020, there is still a lot more to learn about this virus. It will be many months before we have an accurate idea of the overall mortality rate and infection rate of it. The ultimate impact on life insurance rates and underwriting requirements is currently unknown. We can assume that life insurance providers will have more questions related to potential COVID-19 infections on their applications and premiums may go up for high risk groups. 

Will COVID-19 Make People More Likely to Buy Life Insurance? 

Many people buy life insurance when they go through major life events which could be positive or negative. For instance, a young couple have a baby together and decide to get life insurance policies to provide something for their child if something were to happen to them. Conversely, people may start to think about getting life insurance when a close loved one dies and they see the direct fall out of not being prepared for final expenses. 

Something similar appears to be happening during the COVID-19 pandemic as people are confronted by the increased chance of dying. Life insurance companies saw a drastic increase in life insurance applications since February 2020. PolicyMe, a Canadian a digital insurance processor and comparison service has even reported a 60% spike in insurance applications. 

Final Notes:

  • Life insurance companies are paying death benefits to beneficiaries of those who die from COVID-19.
  • You can get approved for a new policy during the pandemic.
  • Insurance companies are focusing more on reviewing medical histories for approval, rather than requiring medical exams.
  • COVID-19 is still new and mortality rates are changing often.
  • It is hard to forecast long-term how this will affect the insurance industry.
Thang Truong
Thang Truong

Thang Truong covers small business insurance and small business success at BravoPolicy. He is a licensed P&C insurance agent. Previously, he held product leadership positions at, Capital One, NerdWallet, and Mulberry Technology. He holds a MBA degree from UC Berkeley - Haas School of Business.

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