I recently got a call from a client asking if he could purchase more life insurance during the coronavirus outbreak and if he could count on the company to pay out if he gets sick.
He lives in San Francisco, one of the areas the coronavirus has hit the hardest.
Since he is currently not infected, I had a hunch he would be okay applying for additional coverage now, but wanted to do some research before I answered him.
In my research, I found out about getting life insurance coverage during the coronavirus pandemic, whether life insurance companies might stop accepting new applications due to coronavirus, and whether you should have any concern about life insurance companies paying their claims.
To prepare to answer my client, I sent out a dozen emails to underwriters at various insurance companies telling them about my case.
My client’s profile is as follows:
- 45 years old
- normal weight
- no medications or health concerns
- Does NOT currently have coronavirus
In other words, he is completely healthy. The only thing going against him is where he lives.
The answers I received were mostly positive but also very enlightening.
The overall feedback was that most could insure him as long as he has not tested positive for coronavirus. Most said if he did test positive, they would postpone offering him any coverage for two to three months after he recovered. Lastly, most said they would not offer coverage if he had any plans to travel outside of the U.S. in the coming months.
I’d like to share several of the responses I got. Please see my bolding for emphasis.
- We can consider from San Francisco at this time. Please note that this could change very quickly as the situation is continually changing.
- For coronavirus, if someone tests positive, or tested positive within 30 days, we are a postpone. However, once the condition resolves and it has been at least 30 days since diagnosis, we would consider not rated as long as medical records confirm resolution.
- We are underwriting as usual.
- We can still consider this individual at this time as long as he is not symptomatic.
- The situation is still fluid and could change, but for now, there are no restrictions for the California area.
- As long as they are not infected with the coronavirus we will still consider the client. Currently, we will not consider any plans to travel outside of the USA until after June 1st.
- Yes, we will consider an applicant from there (or anywhere we are licensed), however, getting him examined may be problematic. Suggest you call around for examiner availability before taking/submitting the application.
- Any underwriting action would be taken based on the results of a positive test, so any positive test would be postponed until fully recovered.
- Currently we only have guidelines for anyone who has tested positive or under quarantine .. we would postpone for a minimum of 3 mos. As this situation is fluid and changing daily, our guidelines may also change.
- If he does not and has not had the coronavirus, we would take his application. The only current guideline changes we have made is regarding foreign travel to China, Hong Kong, Italy and Korea so if no travel involved and no virus history, then would be no change to the underwriting guidelines.
- No restrictions at this time based on state of residence, but that could change at any time. Thanks.
One thing I’d like to point out is that all of the companies said they were willing to consider him. None of them said they were shutting their doors to certain areas or pausing new business.
But as my bold emphasis reveals, nothing is certain for the future; things can change.
Looking to Buy Life Insurance During Coronavirus Pandemic? Here’s What You Should Do
If you’re looking to add more life insurance or purchase your first life insurance policy, there are three key takeaways I learned from shopping for my client above that I’d like to share with you.
1. I highly recommend you buy no exam life insurance (if you qualify).
No exam life insurance, as the name implies, does not require a physical to qualify for coverage. You can apply online and typically get approved the same or next day.
This is critical right now because you don’t want to meet with a nurse for a physical (and may not be able to anyway due to stay-at-home restrictions). Additionally, if you have not been diagnosed with coronavirus, you have the chance to get coverage in place right now before you potentially get the virus, which appears to be a real possibility for all of us.
No exam policies typically have lower maximum coverage amounts, such as $500,000 or $1 million and tend to cost a few bucks more than full-physical policies. However, I highly recommend you get a no exam policy in place first, regardless of cost or death benefit amount, and once you have that, you might look to shop around for a better deal from another company. It’s just too risky to go through full underwriting right now unless you have to.
My choice for no exam life insurance is Haven Life.
Besides providing quick, no exam coverage, I also like that Haven is owned by Mass Mutual who has been in business since 1851 and is rated A++ (Superior) by A.M. Best. In other words, you don’t have to worry about them paying their claims!
2. Use an Independent Online Agency if you can’t get a no exam policy.
There are a couple of reasons you may not be able to buy no exam life insurance. One, you may be too old. Most no exam providers only offer no exam up to a max age (e.g. 50 or 59). Two, as this pandemic progresses, some companies might shut down their insurance offerings.
In either case, you should speak to an independent agency like Policygenius or Health IQ . They are also online and have both exam and no exam options. But the important thing is they are independent, meaning they represent multiple companies. Say you live in a highly infected area. Some companies may continue to offer coverage while others may begin pausing new applications. But an independent agency will most likely be able to point you to a company that is still accepting applications.
My go-to online life insurance agency is Policygenius.
3. Act fast!
If you need life insurance, I highly recommend you move on it fast. As of now, insurance companies are still taking applications and location doesn’t matter (yet). But if the virus continues to spread, we could see companies pause new business in certain areas. By waiting, you also run the risk of getting the virus, which could not only be life threatening, but could also stop you from getting life insurance for at least two to three months after making a full recovery.
That’s why I’m stressing the importance of getting a no exam policy if you can.
Status of Current Life Insurance Policies – Will My Policy Pay Out for Coronavirus?
First, and most importantly, if you already own a life insurance policy, the coronavirus will have no effect on your policy’s payout should you die from it. (Assuming, of course, that you’re up to date on your premium payments and your policy is otherwise in good standing.)
During my 16 years as a life insurance agent, I have been surprised by the amount of people who fear whether their life insurance company will pay out for medical conditions they develop after they buy life insurance.
But that’s not how life insurance works.
Life insurance applications screen for a host of medical issues such as heart disease, diabetes, and history of cancer. The important thing to know is your only job as an applicant is to answer the screening questions honestly at the time of the application. If you’ve never had any of the health issues the application asks for, you say so. But if you buy a policy in good faith, and during the application process answer honestly that you’ve never had a heart condition, and a year later, drop dead of a heart attack, the life insurance company is still responsible to pay.
The same rule applies to coronavirus. If you bought a policy at any point in the past, (even in the last year), the life insurance company still has to pay out if you die from the coronavirus.
The only way a life insurance policy wouldn’t pay out for the coronavirus was if the policy specifically excluded paying for certain types of deaths. In this case, there would need to be a provision saying the policy won’t pay for “pandemics,” or something similar. But in my 16 years, I’ve never seen a “pandemic exclusion.”
There are, however, life insurance policies that only pay for accidental death. It’s important to know that accidental death policies only pay for accidents such as death due to a fall or a car accident. They do not pay out for health related deaths, as would be the case in a death due to coronavirus.
Will Life Insurers Be Able to Afford to Pay Out?
Insurance companies are built for times like this. They are very financially strong with conservative balance sheets.
For example, insurers paid out:
- 39.5 Billion total (1.2 Billion for life insurance) due to 9/11 – Source
- 40 Billion for Hurricane Katrina – Source
- Life insurers paid out $125 million for the Spanish Flu of 1918-19
And they keep on trucking!
In fact, through thick and thin, many of the life insurers you see today like Prudential, MetLife, New York Life, AXA, and Mass Mutual, have been in business for over 100 years!
But what about the cost of the coronavirus?
Air recently conducted a study on the projected impact of a modern day Spanish Flu to life insurers. It concluded that it could cost life insurance companies between $15 billion to $27.8 billion. While that would be a significant blow, most insurers can handle the additional claims. Life insurers already pay out over $77 billion per year in life insurance benefits as it is.
Why is this important?
It has to do with the average payouts life insurance companies will have to make. Seniors are not typically the ones holding the $250,000 or $500,000 policies like the term policies, which are typically owned by folks in their 30’s to 50’s. I predict the policies life insurers are more likely to pay out on in this pandemic will be smaller, whole life insurance and final expense death benefits averaging between $10,000 to $50,000.
The life insurance industry includes some weaker companies that could struggle in a pandemic, but according to research done by the Insurance Information Institute, these would generally be small companies with relatively few insured.
I’m going to share the same recommendation with you that I did with my client. If you need life insurance, I recommend you get moving on it right away. The Team from Money created a guide on the best life insurance companies that is worth looking into. Luckily, amidst these turbulent times, life insurers are one of the few types of companies who have not closed their doors. But as my underwriter friends indicated, anything could happen.
Chris Huntley is a life insurance agent and the founder of insuranceblogbychris. He is currently the President at Credit Knocks and can be reached on LinkedIn. The views in this story are his opinion and do not necessarily represent the views of MONEY.