How COVID-19 Affected Life Insurance and Brought About the Changes You May See Soon

(MaximP/Shutterstock)

The life insurance industry has permanently changed due to COVID-19. The pandemic and the large number of deaths caused by it produced a rush to get life insurance policies—which has placed a degree of uncertainty in the marketplace with insurers trying to calculate just how much to charge.

The biggest problems that the industry faces at present are that there is not enough information available yet to make accurate calculations of costs. The payouts were much larger than ever.

COVID-19 brought a massive increase in payments in 2020 to beneficiaries, CNBC said, coming to more than $90 billion. It was an increase of 15.4 percent above the previous year. In 2021, payouts increased another 11 percent, costing life insurance companies more than $100 billion.

Much of the demand was from families trying to protect the elderly. Personal policies also saw an increase in applicants, but it was less than an increase of 4 percent in either year.

Changes in the Applications

The uncertainty among insurers has led to changes in the questions asked on an application for life insurance. The questions vary between companies and some questions will be vaguer than others. When applying, be sure to answer as honestly as possible—or your beneficiaries may only end up with a return of premiums rather than the face value of the policy.

When COVID-19 started in 2020, millions of people lost their jobs. It made it nearly impossible for many that already had life insurance to keep up with payments. Many dropped their policies altogether. Some insurers made accommodations for them and allowed some of them to skip some payments.

Recent surveys, PWC said, showed that as many as 15 percent of the people surveyed said they are interested in buying life insurance. Another 37 percent expect that the pandemic could hurt their retirement savings. Both groups will need their needs met soon.

Insurance Companies Are More Digitized Now

Due to the pandemic, life insurance companies are more digitized than ever. Employees began working from home—life insurance company employees, too—and this created a greater need to access people online, rather than having them make in-office visits. Life insurance companies responded by going more digital, which seems to have worked out well for both sides, says PWC.

Life Insurance Premiums Apt to Increase Soon

The years 2020 and 2021 brought about some unique costs that are apt to increase the cost of life insurance in the United States. BDO mentions that social isolation during the pandemic resulted in higher rates of psychological trauma, which brought about an increased rate of suicides. It was especially true among minority groups.

Although life insurance policies will usually not payout if a suicide occurs within two years after the policy coverage begins, many suicides took place beyond those limitations. It means that insurers are required to make payouts to the beneficiaries. COVID-19 substantially increased the number of people that were depressed and anxious, possibly leading to many more suicides in the future.

Insurance Company’s Considerations

COVID-19 reduced the number of employees working at the insurance offices and forced many to work from home—if they could keep their job at all. This move forced companies to develop more online technologies to stay in touch with their customers and to get new ones.

As insurers strive to balance their books and stay afloat, some will be forced to sell properties and other assets to continue making payouts. They have also had to make telework keep up with their needs and increase their use of technology. They must also decide whether it is safe to bring employees back to the office.

Equifax offers a word of caution to potential new life insurance buyers. The company says that life insurance companies are asking people still sick with COVID-19 to avoid applying until they have recovered. This trend indicates that life insurance companies may become more careful about those they insure—or how much they are willing to insure you.

Remember that many companies offering life insurance also provide health insurance, and other types. It could result in an insurer being hit twice with severe costs for many people: having to pay for long-term hospital stays and deaths.

The Future of Life Insurance

Life insurance companies in Europe, BDO says, have already added some new services to meet the needs of their customers. Some offer ride-share for doctor visits, make medical home visits, and have started telemedicine. Other companies in the United Kingdom and Asia even offer guaranteed placement in a senior living community instead of payouts when needed.

Steps Needed to Buy Life Insurance

Because of COVID-19, which does not appear to be dying out yet, you cannot expect the cost of life insurance to get less expensive. As insurance companies accumulate more accurate data, you can expect life insurance plans to become more expensive. If you are in the market for life insurance, you may want to start conducting a life insurance comparison to find your best life insurance policy.

You can get a life insurance quote from individual companies or go to an insurance broker, who will give you several and let you choose. Remember that life insurance premiums are based on your health, so it is better to obtain a policy while you are healthy. Your age also affects the cost of life insurance, because it’s cheaper the younger you are.

Buying life insurance—whole life or term—will give you steady premiums each month no matter what happens to premiums in the future. Whole-life premiums never change for as long as you keep the policy in force. Term-life premiums only change when the term ends, which can be one to 30 years.

Whether or not you already have life insurance, take the opportunity to think about your present needs. If you are the sole breadwinner in your family, you may want to evaluate your family’s needs, if you should die from COVID-19 or some other event, and prepare for the possibility.

The Epoch Times Copyright © 2022 The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.