The window for buying life insurance may be closing quickly for millennials
Life insurance companies don’t like the unknown. They operate on numbers: Gathering information about applicants, asking a lot of questions, and using actuarial tables to help decide the rates for each applicant.
The COVID-19 pandemic is bringing a lot of unknowns to their desks.
“Now because of this black swan event, there are no actuarial tables for this,” says Chirag Pancholi, co-founder of Jenny Life and an industry veteran.
Pinning down accurate numbers for COVID-19 mortality can be nearly impossible. Numbers of total cases are likely under-reported because people with mild cases likely don’t seek medical care, there have been limited supplies of testing kits, and there’s a limited capacity for labs to process tests worldwide.
Climate conditions, such as warmer weather, could decrease the risk of contracting COVID-19 if the virus degrades in warmer temperatures. Socioeconomic factors can also affect mortality rates, such as pre-existing health conditions and access to health care.
“The ultimate rate of mortality from COVID-19 will evolve over time,” says a March 16, 2020, report from the Society of Actuaries.
The financial markets and low interest rates are also roiling life insurance companies, which have substantial investments.
New Speed Bumps in the Life Insurance Buying Process
So what’s a life insurance company to do in the face of COVID-19? Right now, in a growing number of cases, they’re asking more questions and hitting the pause button on some applications to buy themselves time.
There are now a few reasons a life insurance application might get held up.
Trying to Get Doctors’ Records
It’s standard for life insurers to request medical records from your doctors. This allows them to verify your health information and spot issues that you forgot to mention on the application.
Getting medical records is “problematic in this COVID-19 world as doctor’s offices are notoriously slow in providing these in normal times, and right now many of them do not have what they consider non-essential office staff coming in” to help with tasks like this, says Byron Udell, CEO of AccuQuote, an online life insurance agency.
“So cases that require these records are getting stuck in limbo as carriers (once they decide they need them) typically won’t issue policies until they get them. That could be many months away,” he says.
Now the whole world is a Level 4.
Asking About All International Travel
Life insurance companies have long asked about applicants’ plans for international travel. In the past they would generally postpone an application for anyone planning travel to a country pegged as Level 4 (“do not travel”) by the State Department, such as Afghanistan.
But now the whole world is a Level 4.
Many life insurers are responding by delaying all applications for all people who plan to travel outside the U.S. (such as in the next 60 days) or who have recently returned. Expect your application to be postponed for at least 30 days after you return.
Pacific Life, for example, will postpone the application of anyone who intends to travel internationally in the immediate future. The company will also wait for 30 days after an applicant returns from international travel. If the person then tests negative and is cleared, they can submit an application or take delivery of a policy. After the 30-day waiting period, if an applicant tests positive for COVID-19, Pacific Life must receive a statement that the virus has cleared before it will consider the application or issue the policy.
Asking About Diagnosis of, or Exposure to, COVID-19
Life insurers are assessing their guidelines constantly as the situation evolves. New questions about COVID-19 are making their way into the application process.
You might also now be asked if you’ve been exposed to COVID-19.
At least one insurer now says anyone who has been diagnosed with COVID-19 will be postponed for at least 30 days and can be reconsidered when there’s proof that their health is back to their regular baseline.
You might also now be asked if you’ve been exposed to COVID-19. If you have, your application could be postponed for 30 days, with proof there’s no infection.
Application guidelines will vary by insurer and not all insurers ask specifically about COVID-19—yet. Expect more life insurers to start asking, especially to weed out applicants who may already have coronavirus symptoms and decide to get life insurance.
“As life companies out of necessity seek to protect themselves from potential adverse selection, we expect carriers to implement underwriting procedures designed to identify applicants who have either contracted or been exposed to the COVID-19 virus,” says Thomas Rosendale, a director with A.M. Best who follows the life and health insurance industries.
Udell of AccuQuote says, “It’s a complicated arena for sure, with so many carriers, so many rules, and the rules changing every week.” His company tracks the rules for hundreds of life insurance products.
Skirting the Life Insurance Medical Exam
Many life insurers use a life insurance medical exam as one tool to gather information about applicants. The exam is often done by having a paramedical professional come to your house to collect information on your height, weight and blood pressure, and take blood and urine samples.
The prospect of that is unacceptable to many life insurance buyers now.
“We are hearing directly from customers who are balking at meeting with a paramed examiner,” says Bob Bland, CEO of LifeQuotes, an online life insurance agency. As a solution, LifeQuote’s agents will focus on quotes for no-exam policies. In general these are more expensive than policies that require an exam.
“We’re kinda being forced into recommending a shorter term no-exam [policy], such as 10 years, with the thought of getting a lower cost exam-required plan at a later date,” says Bland.
There are also options for fast life insurance, including instant life insurance, with a range of pricing. Younger and healthier applicants tend to qualify for these policies. But taking a life insurance medical exam has typically been the pathway to the best rates.
Are Life Insurers Shutting the Door?
If you’re planning to buy life insurance in the near future, your best bet may be to jump on it.
“We don’t know what new restrictions are coming tomorrow, but we see the carriers justifiably concerned and scrambling to react,” says Udell of AccuQuote.
Udell believes that time is of the essence for life insurance shoppers. “At least right now, things still look very good for consumers who want to get life insurance issued at pre-COVID-19 pricing and, for most folks, pre-COVID-19 underwriting rules. As this situation evolves, I believe things are going to change, making life insurance harder to get, and more expensive,” he says.
The door may be closing for now. Rosendale of A.M. Best predicts, “Depending upon the extent of progression of the disease in the U.S., it is possible that companies could even temporarily suspend their acceptance of life insurance applications.”
See more about Your Money And Coronavirus: A Financial Protection Guide.
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