The coronavirus has more people thinking about life insurance, and it has also changed the process for getting coverage.
THE CORONAVIRUS IS making more people think about the importance of life insurance to protect their families if anything happens to them – even if they’re healthy now. “The demand for life insurance is up,” says Byron Udell, president of AccuQuote, an independent life insurance brokerage firm. His company is taking about 35% to 50% more applications each day and is hiring more agents.
But social distancing rules have made it difficult to follow the regular procedure for getting a policy, and companies are being more careful about insuring some people who face greater medical risks. The process, prices and rules are changing rapidly as insurers learn more about the pandemic. Here are answers to some key questions about buying life insurance now.
Yes. Most insurers haven’t changed their rates for healthy people, although Udell expects a few companies to increase premiums in the next few weeks. Several insurers have already added restrictions for certain groups of people because of the coronavirus. It can be more difficult for people who have other health issues to get coverage now, and one insurer stopped issuing policies to people over age 70, even if they are in good health, says Udell. A few insurers have stopped selling 30-year term policies, but that change is more because of low interest rates than because of the coronavirus, he says.
If you’ve been out of the country, most insurers are requiring you to wait at least 30 days before applying for coverage, no matter where you’ve been. If you plan to travel out of the country, you usually have to wait at least 30 days after you return to apply for coverage.
Not if they can avoid it. In normal times, most life insurance companies require a paramedical exam, where someone comes to the applicant’s home to take blood and other tests and ask about their medical history. It’s difficult to have in-person visits during the coronavirus pandemic, so more insurers are starting to offer policies without a medical exam. You’ll usually need to answer extra questions about your health history on the application, and the insurers also use other methods to assess your risk – such as records of your prescription medications, information from previous life insurance applications from the Medical Information Bureau, records from recent doctors’ visits (electronic medical records, when possible) and your driving records. Some companies use credit scores, and others use black box-type “risk scores” that are put together by the big data companies like TransUnion or LexisNexis, says Udell.
Some companies aren’t eliminating paramedical exams entirely, but are bypassing them whenever possible. “Under certain circumstances, depending on their age and how much insurance they want, we’ll run clients through a predictive model, and they may not need a paramedic exam or fluids tested to be issued a policy,” says Quentin Doll, vice president of life insurance products for Northwestern Mutual. “If you can go through the accelerated process, we can issue a policy within a day or two. That’s our goal.”
Not necessarily. In the past, the premiums were much higher for policies that didn’t require a medical exam. But as insurers use other resources to assess risk, the prices have become much more competitive. In fact, the companies that don’t require medical exams currently have the lowest rates for some ages and policy amounts, says Udell. The no-exam companies generally have coverage limits ranging from $100,000 to $1 million, with the lower limits for older applicants. Udell works with about six companies that aren’t requiring an exam now, and about 10 more don’t require an exam if you meet certain medical requirements on your application. The no-exam policies can be issued within a few days.
For example, a 40-year-old man who is in excellent health can get a $500,000, 20-year term insurance policy for $309 per year from a company that doesn’t do exams, which is better than the rate for the companies Udell works with that do require medical exams. For a 50-year-old man, the least expensive company Udell works with is charging $858 per year for a 20-year $500,000 policy, but it requires a medical exam. The lowest-cost company that doesn’t require a medical exam is charging $940 per year. (Premiums are lower for women.)
Not right away, but the rules vary a lot by company and are constantly evolving.
People who have had symptoms or tested positive for COVID-19 have to be symptom-free for a month before Northwestern Mutual will start underwriting their policy, says Doll. “Once they’ve fully recovered, and as long as there are no continuing underlying conditions, there’s nothing that would prevent them from getting coverage.”
Some insurers require people to wait for at least 30 or 90 days before applying for coverage if they’ve been exposed to anyone with COVID-19, says Udell. Exposure can be difficult to prove, but that would make it hard to get coverage if anyone who lives with you has had a positive COVID-19 test.
Probably, but you may have a few options. If you’re just furloughed, your employer may keep your coverage for a while. “It’s all over the board,” says Robert McGee, senior director of absence, disability management and life insurance for Willis Towers Watson. “Some carriers say they’ll allow an employer to continue coverage for employees on furlough or temporary layoff for two to 12 months.”
If your employer’s coverage ends after you are laid off, you may be able to convert the term policy into a whole life policy that you can keep after you leave your job. “But the increase in premium can be astronomical,” says McGee. “That conversion option usually is not the best option for someone who is laid off.” Some policies offer a “portability” option that lets you switch to your own term insurance policy, which costs less than the conversion policy but may still be more expensive than buying your own coverage if you’re healthy, he says.
Contact your agent and insurer and find out about your options. Many insurers are offering more payment flexibility over the next few months. New York Life, for example, is temporarily pausing cancellations for non-payment of premiums through June 23, 2020 (only for policies that were issued before March 24, 2020 and the first premium has been paid). All missed payments will be due once that period ends.
“Life insurance is one of the most important ways people protect their families, and we have seen a significant increase in interest since this situation emerged,” says Aaron Ball, senior vice president and head of insurance solutions at New York Life. “We have been working to ensure that people who want protection for their families can get it, and no existing policyowner loses their life or long-term care insurance coverage during the next several months because of a financial hardship caused by COVID-19.”
Yes. If you already have a permanent life insurance policy, then you can borrow most of the cash value at any time without having to submit a loan application. The loan doesn’t affect your credit rating, and you can usually get the money within 48 hours. “Permanent insurance provides a lot of flexibility,” says Doll. “It builds accumulated cash value that can be accessed at any time and for any reason very quickly.” He says that policy loans have been especially helpful for small business owners who need the extra cash to help keep their businesses running over the next few months.
You pay interest on the loan, but there’s no repayment schedule. If you die before repaying the loan, the balance is subtracted from the death benefit.