Coming off a spring and summer of untimely Connecticut funerals — life celebrations to be sure as well — it seems a bit crass to be revisiting another bottom-line fact of life: the value some nameless actuary assigned your life or my own years ago in approving a life insurance policy. But I doubt I am the first person to wonder if coronavirus kicks in any exclusions that could limit the ability of my beneficiaries to collect on that policy.
Turns out the virus cannot — with one big exception we’ll cover — but there are a few more big questions out there when it comes to life insurance in the context of a pandemic.
First things first — if COVID-19 gave us all a wake-up call, that was the case as well for the life insurance industry. That had less to do with any worries for making good on payments owed beneficiaries, but rather against the intermediate outlook for interest rates on which carriers depend for investment profits over the lifetime of an insurance policy.
Prudential, by far the largest underwriter in Connecticut with more than $8 billion in policies at last report, has been scaling back its issuance of universal life insurance this summer, while maintaining its term life insurance business. The company estimated a $55 million impact as a result of mortality rates due to COVID-19 in the third quarter.
Bottom line? For companies selling individual life insurance policies, the business model depends in part on signing up new members, at actuarially sound premiums. They need you as much as your beneficiaries need them.
If COVID-19 gave us all a wake-up call, that was the case as well for the life insurance industry.
The pandemic prompted more young people to consider the purchase of life insurance, according to Stephanie Antriasian of Bouvier Insurance, which has offices in West Hartford, Simsbury, Guilford, Old Lyme, Waterford, Norwalk and Bethel. “In the beginning … we were definitely getting some phone calls,” Antriasian says. “As soon as the pandemic came, [people] were perhaps concerned that if they didn’t have any, would they be able to get some life insurance.”
Whether shopping around or checking up on an existing policy, a few questions are top of mind.
What to buy, how to buy and how much?
The vast majority of people go for term life insurance, usually for coverage periods extending 20 or 30 years that allow people to lock in lower rates during their childrearing years, on the assumption they will accumulate assets over their earning years to bequeath to spouses and children at the expiration of those term policies. While whole life insurance is mostly out of vogue due to the dwindling payback later in life as premiums spike, carriers have adjusted by offering guaranteed universal life policies that have more moderate premium increases; as well as term policies stretching 40 years.
If looking for a quick measuring stick on options and pricing, be aware that many quote engines are limited likewise to a select group of participating carriers. Like most any purchase with significant life implications, in the end you’ll want to find an adviser you can trust, whether through your existing insurance agency or in getting any recommendations. Agencies represent only a handful of carriers of the some 300 licensed to issue policies in Connecticut — if starting from scratch, you can get some basics on how to go looking at the Connecticut Insurance Department’s website at portal.ct.gov/cid.
Agents generally recommend coverage on either side of 10 years of replacement earnings for beneficiaries. Online quote engines suggest a healthy Connecticut resident looking for $500,000 of coverage on a 25-year term policy should be prepared to pay $25 a month.
Can a COVID-19 diagnosis deny me coverage?
In April, Connecticut’s insurance commissioner barred life underwriters from asking any policy application questions related to COVID-19 for the immediate future, even whether an individual undertook a precautionary quarantine.
Some carriers enacted similar policies on their own, but presumably that restriction will ease as coronavirus becomes a fact of life like diabetes or any other medical condition. For those who have survived COVID-19 or reported the possibility of an exposure, however, there is the likelihood of a delay to ensure full health before moving ahead — as much as a full year.
Obviously, the big no-no is misrepresenting any information on the coverage, which can result in a denied claim during a two-year “contestability” period to protect carriers from fraudulent applications.
Do I have to see a doctor?
Agents can get the information they need over the phone or Zoom to recommend options, but in some cases carriers will still dispatch a nurse to your home to collect blood and urine samples for analysis of any pre-existing conditions — though not all, according to Kate Theroux, a spokesperson for the industry trade group LIMRA, which has polled carriers on their pandemic policies.
“More life insurance companies have made changes to help consumers get the coverage they need under a social-distancing environment,” Theroux says. “Over two-thirds of the respondents have changed their underwriting process. Of those who have changed … over one-third are using attending-physician statements in place of fluid requirements.”
Carriers continue to conduct their own telephone interviews and check medical records to complete the application process.
Will life insurance cost more going forward?
Nationwide, whose book of business has a heritage stemming back to the nation’s first life insurance company in 1759, says it is treating COVID-19 for now no different than any other illness it factors into its actuarial underwriting guidelines.
But management consulting firm Deloitte has predicted actuaries will have to adjust those tables even with any further decline in morbidity rates.
“There are so many things that can impact the rates for an individual,” Antriasian says. “If a carrier feels that whatever it is they found in the application or the phone interview is potentially a greater risk … it can change, absolutely.”
For an existing policy, what are my options to extend coverage?
They call it term life for a reason: it locks in payments and coverage for a set number of years based on your health and profile at the point of purchase. Many policies in force allow people to reduce coverage in exchange for a lower annual premium — but adding on years or dollars is going to kick off a fresh round of medical and life scrutiny for actuarial purposes.
“Sometimes it takes something like a pandemic for people to realize, ‘Wow, this is something I never thought about, or have been putting off,’ ” Atriasian says. “You’d be surprised how many people don’t have life insurance.”