More than 4.9 million people have died from the COVID-19 disease worldwide, including over 741,000 Americans, according to real-time data from John Hopkins.
This pandemic has impacted everyone around the globe, from individuals to families to businesses. Even if you haven’t been diagnosed with COVID-19, you likely know someone who has.
So, how does a pandemic affect life insurance? Many people have asked this question since the COVID-19 pandemic began in early 2020.
The Impact on the Life Insurance Industry
One silver lining of the pandemic is the urgency for insurance companies to embrace digital processes.
In the beginning of the pandemic, the lockdown paused many steps in the life insurance buying process, such as in-person medical exams. In addition, prior to a vaccine, insurance company employees were getting sick or offices were shut down because work-from-home offices were not yet set up, so this created a backlog of life insurance applications to get to.
Like the rest of the world, insurance companies didn’t know how long the shutdown would last. Many realized that, in order to keep business going, they had to utilize technology perhaps much sooner than they planned.
At the start of 2020, just before the COVID-19 pandemic began, 18% of insurance companies stated they had incorporated automated underwriting into their new business process or had plans to do so. By the start of this 2021 year, 40% of life insurance companies stated this.
Through automated underwriting, insurance companies pull consumer information, such as prescription history, motor vehicle records, and background checks, and complex algorithms interpret this data to determine if an applicant can be approved for the insurance without requiring additional time-consuming data, such as medical records and a medical exam.
Consumers feel the benefits of this in a couple ways. If eligible for automated underwriting, eliminating the need for insurance companies to order your medical records saves time. Decisions that would once take 20 to 30 days can be made in as little as 24 hours. In addition, eligibility also means no need to get a medical exam.
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COVID-19 and Its Impact on Consumers
“I have life insurance already.”
If you already have life insurance, you’re good to go. As long as your policy is inforce (paid premiums are up-to-date), your policy will pay out due to an unfortunate death as a result of COVID-19 or related complications.
If you only have AD&D (accidental death and dismemberment) life insurance, then you do not have coverage against COVID-19. AD&D insurance only covers death as a result of an accident or loss of a limb.
If you have an AD&D rider on top of your traditional life insurance policy, the base death benefit will pay out. The added AD&D benefit would not be paid out.
If you only have a group life insurance policy through your work, as long as you’re still employed and the coverage is active, the death benefit will pay out due to an unfortunate death as a result of COVID-19 or related complications.
However, if your case of COVID-19 is severe and you’re hospitalized and you end up not being able to work and are let go, your group coverage also then expires. This is more common than people think. Many people don’t realize your group coverage through your job is only in effect if you’re still working there.
If you’re relying only on group life insurance to financially protect your family, I recommend you highly consider getting an individual term life insurance policy that you own.
“I got the COVID vaccination.”
If you have already received the COVID-19 vaccine, do not worry about your life insurance. Your policy is still active.
May 6, 2021 update: for those who have life insurance through John Hancock and participate in their Vitality program, you can earn extra points when you show proof of your COVID-19 vaccination.
If you don’t yet have life insurance, you are eligible to apply. According to Swiss Re, one of the largest reinsurers, your life insurance rates will not be impacted by your vaccination.
The vaccine may have produced some uncomfortable side effects, such as severe flu-like symptoms. But these side effects won’t impact your medical underwriting with the life insurance companies. Medical underwriting is when the life insurance company evaluates your mortality risk and determines what your life insurance policy will cost.
If you were hospitalized due to a vaccination reaction, which is rare, there is a slight chance these complications could impact underwriting. Do not let this prevent you from applying, however.
Not all life insurance companies underwrite in the same way. Quotacy works with over 25 of the nation’s top life insurers and we will advocate for you. We comparison shop to find you coverage, even if you have a complicated medical history.
“I have COVID and want to buy life insurance.”
If you currently have COVID-19 and are applying for life insurance, many life insurance companies will postpone your application until you recover and are complete with quarantining. After a full recovery with no complications, you can qualify for the best pricing.
“I had COVID and now want to buy life insurance.”
If you were diagnosed with COVID-19, are done quarantining and have made a full recovery, then you won’t have any issues getting life insurance. Your COVID-19 history won’t have any impact on your life insurance rates if you recovered without complications.
If you have complications as a result of COVID-19, the health issues will be evaluated and may impact your life insurance rate. For example, long-term lung or kidney issues have been known to occur and life insurance premiums are likely to be higher if these organs are compromised.
If you were on a ventilator while recovering from COVID-19, many life insurance companies won’t offer you best class (a.k.a. the best rates) until after two years have passed. You can still likely be approved, you will just need to pay a little more.
If you had COVID-19, we recommend that you apply through a life insurance broker. A broker can shop your case across multiple life insurance companies to find the one that will give you the best price. Even if the offer isn’t best class (i.e. Preferred Plus), we still recommend you accept it. After time has passed from your recovery of COVID-19, you can re-apply and see if you qualify for a better rate.
As life has recently taught us, tomorrow isn’t promised. No one could have predicted a pandemic in 2020. Life insurance protects our families against the unexpected.
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About the writer
Natasha Cornelius, CLU
Senior Editor and Licensed Life Insurance Expert
Natasha Cornelius, CLU, is a writer, editor, and life insurance researcher for Quotacy.com where her goal is to make life insurance more transparent and easier to understand. She has been in the life insurance industry since 2010 and has been writing about life insurance since 2014. Natasha earned her Chartered Life Underwriter designation in 2022. She is also co-host of Quotacy’s YouTube series. Connect with her on LinkedIn.