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Pandemic Deaths: Impact on Life Insurance Benefits

Life insurance companies plan for future losses (death benefit claims), including pandemic events like COVID-19. Statistics, actuarial, and mortality tables guide life insurance companies in deciding what to charge for life insurance covering death from all illnesses or accidents. What that means is consumers can be confident that loved ones will still receive death benefits after their passing, even in a pandemic.

Life insurance pandemic clause

Consumers should know that life insurance companies consider the coronavirus just another illness in life insurance underwriting. That means if you have a current active life insurance policy and die of COVID-19 or any other pandemic, your beneficiaries will still receive the benefit you purchased. Life insurance companies expect pandemics will occur and plan for the future. Consequently, consumers would not expect a pandemic clause in their current life insurance policy.

Insurance premiums and pandemics

Consumers expect life insurance premiums to increase during a pandemic. However, according to a recent study conducted at the National Library of Medicine titled "Did COVID-19 change life insurance offerings?" the authors found that the current COVID-19 or Delta variant pandemic deaths do not impact life insurance death benefits or a rise in premiums. The study also noted additional resources that support the practice by life insurance companies to proactively manage all pandemics like the Swine Flu, HIV/Aids, flu outbreaks, and COVID-19, or the Delta variant, for example.

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Understanding different types of life insurance

There are two basic types of life insurance: term insurance and permanent life insurance. Each offers a death benefit but differs on the length of time the policy is in force. For example, term insurance may be bought for 20 years to cover a specific event like a mortgage. Permanent is designed to build cash value savings for future emergency needs.

Term life insurance and pandemics

Term life insurance can be purchased for a specific period, typically one to 30 years. The insurance premium is agreed upon at the beginning of the policy and remains the same for that specified time agreed to by both sides. Term insurance is designed to provide a death benefit during a time when consumer assets may be low, and the death of the individual insured would bring additional financial hardship to their loved ones. There is not a pandemic clause built into term insurance. However, if a policy goes out of force or comes to the end of its term, new underwriting may be required by the company.

Permanent life insurance and pandemics

Permanent life insurance offers lifetime coverage as long as the premiums are paid. That's important to note, as this type of policy offers a 'cash value' component. That means part of the life insurance premium goes toward a savings account. But, like term insurance, no pandemic clause is built into permanent life insurance. Consumers will find various permanent life insurance policy options noted here.

  • Whole Life
  • Variable
  • Universal Variable
  • Indexed Universal Life
  • Whole Life Final Expense

Life insurance pandemic payouts

It is important to note that while a permanent insurance policy offers a savings or cash value component, the death benefit is paid differently than term insurance. Neither type of life insurance will deny a pandemic death benefit or related illness that complicates the death. Both policies pay the face value amount. However, when the face value is paid, the savings account is retained by the life insurance company in a permanent life insurance policy.

Life insurance sales grow in a pandemic

The MIB Group, an industry leader and partner of the insurance industry, notes that in the COVID-19 pandemic and after, life insurance sales have grown or remained mostly steady. The growth accomplishes two goals. The replenishing of premiums for financial stability in the life insurance company and, ultimately, stability for the family who owns a life insurance policy and receives a death benefit.

Buying life insurance in a pandemic

Choosing the way you purchase life insurance is personal. One option is purchasing from an established life insurance agent or financial planner/advisor who can guide you. Your current car insurance agent may be a third resource if you don't have life insurance. Find out if they offer life insurance or if they can refer an established and experienced insurance professional or resource.

Key decisions about life insurance:

  • Determine if term or permanent life insurance meets your goals.
  • Ask good questions if you have a serious illness that may affect underwriting.
  • Review the cancelation sections of the policy.
  • Determine what exclusions may impact your policy in general.
  • Understand what happens to your policy if a premium is missed or the policy lapses.

The life insurance application process

The best time to apply for life insurance is when you are not experiencing a current health event. The application process can be put on hold or delayed if an ongoing illness requires additional underwriting. If an applicant has a scheduled complicated heart surgery, the life insurance application may be delayed until the surgery results are determined. The same guidelines may be valid during a current COVID-19 health event.

Life insurance exclusions and policy issuance

Each life insurance company may have a list of excluded illnesses like specific types of cancer, diabetes, heart disease, or HIV/AIDS. When the application and underwriting review process are complete, the company will offer a policy to the applicant. The proposal outlines any additional restrictions added to the policy. If there are, the applicant has the right to decline the policy or take it as offered by the life insurance company. Remember, each company approaches underwriting differently, so listen to professionals and research options before your purchase.

Future outlook

Life insurance companies will continue to adapt their products to meet the needs of consumers. Pandemic illnesses are part of the global culture we live in. A proactive life insurance company understands that illnesses like coronavirus pandemics can create above-average losses. The ultimate benefit of owning life insurance is to lift the financial strain it can relieve for those left behind. The Coronavirus reminded everyone of the vulnerability we face.

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