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Money-Morning Consult Poll: life insurance
Money; Getty Images

If your financial plans for 2021 include spending more on life insurance, the pandemic is likely the reason. And the youngest life-insurance buyers are more likely to say they'll spend more on coverage this year. So reports a new Money-Morning Consult poll of 2,200 Americans about their finances conducted in late January.

Among survey respondents who plan to step up life-insurance spending, a large majority said COVID-19 was either a major (48%) or minor (30%) factor in their decision. By contrast, only a little more than half of those who planned to cut life-insurance spending cited the pandemic as a motivation for that cutback.

The pandemic created new demand for life insurance in some areas, but also chipped away at it in others. So while 12% of respondents planned to spend more on life insurance this year, about the same proportion (11%) planned to spend less. (Almost half -- 47% -- reported no plans to change what they spend in 2021.)

When people lose their jobs or see their income shrink, life insurance isn’t nearly as much of a priority as, say, keeping the lights on. Perhaps predictably, then, respondents to the Money-Morning Consult poll who said their financial situation was worse than at the same time in 2020 were more likely to cut life-insurance spending than to raise it.

“I think the COVID-induced labor recession has knocked some demand,” says says Cathy Seifert, insurance analyst at CFRA Research, although she adds that the hardest-hit sectors — hotels and restaurants, for instance — tend to employ a lot of low-wage workers who aren’t typical life insurance buyers anyway.

Gen Z faces their mortality?

One standout finding is that so-called Gen Z respondents, who were born in 1997 and after, were significantly more likely than adults as a whole to say they will increase life-insurance spending this year. About 19% said they planned to spend more, compared with 12% of adults overall. So-called Millennials, who were born between 1981 and 1996, were slightly more likely than other adults to say they will spend more on life insurance in 2021 compared with 2020.

That trend aligns with the observations of some insurance experts. “I think younger people are starting to realize they’re not invincible,” says Barb Pietrangelo, a financial planner and insurance expert at Prudential. “I’ve actually had more clients say to me, ‘We’d better talk about this.’ The word is starting to get out that you don't want to wait until you’re old and unhealthy.”

Other observers say the pandemic is triggering a more general awareness of the need to insure one’s life. Only 59% of Americans have life insurance, and about half of those with insurance are underinsured, according to financial-services research organization LIMRA. “COVID-19 was a wake-up call for a lot of people that they need life insurance protection,” says Steve Parrish, co-director of the Center for Retirement Income at the American College of Financial Services. “We have this uninsured population in the U.S. — that’s a tailwind in the sense that there’s a lot of demand.”

Steady rates and streamlined applications also help

It's helped demand that life-insurance rates have remained fairly stable, against the expectation from some that a pandemic that has claimed 470,000 lives and counting in the U.S. would drive up the cost of a policy.

The pandemic also forced life insurers to get creative about how they determine a buyer’s risk profile. Insurers have traditionally required a physical in order to determine your health, and in the early days of the pandemic, people weren’t able to schedule in-person appointments with health professionals. Insurers looked to technology — artificial intelligence and predictive analytics — to help fill in the gaps.

“They really have changed that underwriting process,” Parrish says. “That’s really a fast-changing area, and that makes it quicker and cheaper” to get a policy.

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