Life Insurance Prices Will Likely Rise Because of the Pandemic—Here’s What That Means for You
|This content was originally published on Money.com|
It’s a scary time right now. Many of us are still working from home, watching the news, washing our hands obsessively and worrying about our families.
By now, chances are you know someone who has died as a result of Covid-19. It is times like these that actually motivate many of us to get our family protection plans in place.
If these unprecedented times have you thinking, “Should I buy life insurance?” — you’re truly not alone.
“Typically, life insurance sales spike after any kind of a catastrophe,” says co-director of the Retirement Income Center at The American College of Financial Services Steve Parrish, who forecasts that prices will creep up in the wake of the pandemic.
Application activity for life insurance has already increased: It’s up 1.5% from last year, according to the MIB Life Index.
The importance of acting fast
While it might come as a surprise, you can absolutely buy life insurance right now (as opposed to, say, hand sanitizer), even while we’re in the midst of a global public health crisis. And this is a purchase you don’t want to delay — the situation is changing rapidly and carriers’ underwriting guidelines are subject to change.
Although the Covid-19 pandemic is new and alarming in its scope and rapid spread, this isn’t the life insurance industry’s first rodeo when it comes to unexpected, life-threatening dangers. “They have the experiences in modern history of the AIDS epidemic, 9/11 and SARS,” Parrish points out.
That said, be prepared for some logistical challenges when buying a policy via the traditional channels in today’s battened-down environment.
“There are 200 million really healthy people in this country,” says Jason Lea, president of Brokers’ Service Marketing Group in Providence, R.I. “From a consumer perspective, they absolutely can buy life insurance. The challenge is, how do you do this in a paperless, non-face-to-face world?”
For instance, insurance brokers are most likely working from home right now, which could make meeting in-person difficult or impossible. “Traditionally, they’d go to an insurance agent, but now there are options online as well,” Parrish says. “The insurance industry has been comparatively slow to embrace some of the sales technology, but some are taking applications online rather than in person.”
The other hiccup involves the medical exam that has long been a staple of the evaluation process for obtaining life insurance. (FYI, if you’re worried about using limited health resources during this time, don’t be. There are dedicated examination companies contracted by the insurance companies to perform these exams, so it’s not as if you’d have to take up your regular doctor’s time for an elective visit.) Current recommendations around social distancing and local shelter-in-place regulations might mean that it takes you longer to get coverage if you can’t make an appointment or get to the office of someone who performs these exams right away.
The good news is that some insurance companies had already begun, pre-pandemic, taking steps to phase out the in-person medical exam in favor of technology-based risk assessments. “A lot of that has taken care of itself as technology has advanced,” Parrish says.
“About five years ago, the life insurance industry decided it needed to evolve and get away from the traditional medical exam and blood draw,” Lea says, predicting that Covid-19 will accelerate the industry’s embrace of more tech-centric underwriting practices. “What I see happening here is companies trying to innovate. This global event we’re in the beginning stages of is going to catalyze that. It’s going to force carriers to get better at those underwriting offers without the traditional exam.”
The limitations of digital evaluations
Whether or not a digital evaluation will suffice in your search for a policy depends on your health and medical risk factors, along with the amount of coverage you’re seeking. (As you might imagine, you have a better shot qualifying for a digital evaluation if you’re on the younger side and don’t have pre-existing conditions or a chronic illness.)
“It puts a lot of pressure on the carriers to not miss something from an underwriting perspective,” Lea says. “How do they get to an underwriting decision without a full medical exam and blood work?” Insurance companies that let you apply for and generate quotes online combine the information you provide with details they can obtain through publicly available data and,with your permission, will evaluate your medical records to gauge your risk profile.
The turnaround time you can expect between requesting a quote and having your life insurance policy in place mostly depends on two key factors: your health status and your desired coverage amount.
“If you’re talking about millions, it might take a few days or a few weeks,” Parrish says. “If we’re talking about less than a million dollars of insurance, with some shopping around, there’s probably a way to acquire that insurance within a week.”
Although the cost of a life insurance policy is relatively stable right now, Lea forecasts that prices will creep up in the wake of the pandemic. How much and how quickly it may rise is impossible to predict right now, he notes. The world is still waiting to see how the trajectory of the illness will unfold — if overwhelmed hospitals cause an uptick in mortality rates, if the virus retreats initially, only to return after a period of time or if scientists are able to develop and distribute a vaccine quickly.
“The economic side of it is somewhat unknown,” Lea says. “What you can say for sure is that for the next six months, products are going to be cheaper than for the following six months.”