By Jason Call, Chief Operating Officer
A pandemic causes us to reevaluate what we see as most important in our lives. Things that seemed to be a priority may become less important as our focus shifts to essential things. Such times provide ideal opportunities to make changes to our financial plans and risk coverage. Many of us have started that evaluation process but may forget about an essential part of our personal risk management plan – Life Insurance.
Why Life Insurance?
Life insurance plays an important part in any complete risk management or financial plan. At the heart, life insurance is about taking care of loved ones. It allows you to protect your family members from the devastating financial losses that can result if you pass away unexpectedly. Because you care about your family, you want to know that they won’t need to worry about how to make ends meet. By protecting their financial future, you allow them to maintain their lifestyle if something unexpected happens to you. Additionally, your life insurance gives your family the means to help pay off debts, fund college educations, and much more.
What Does Life Insurance Provide?
A life insurance policy delivers a specified sum of money, called a death benefit, when the person covered passes away. After your death, your family can be assured that the amount of coverage you’ve chosen will be available almost immediately. Additionally, depending on the coverage type, the death benefit is generally not taxed. In other words, a $750,000 policy will pay $750,000 in benefits to your loved ones.
What Types of Life Insurance Exist?
Many different types of life insurance policies exist and each one provides different advantages, payment structures and benefits. Our carrier partner, Cincinnati, provides a number of resources to understand your life insurance options. In general you will chose from one of three types of life insurance:
- Term – term life insurance provides a set benefit if you die during a specified period of time ranging from 1 to 30 years.
- Whole – whole life insurance provides lifetime coverage and a guaranteed amount to pass on so long as the contract is up-to-date.
- Universal Life – universal life is an investment savings vehicle that allows you to select a set or increasing death benefit that can change based on your life circumstances.
How Has Coronavirus Changed Life Insurance?
If you already have an existing life insurance policy in place, your life insurance will generally not change even if you die of a pandemic illness. Assuming you were truthful on your application, life insurance usually covers pandemics. However, some companies have changed their approach to life insurance applications as well as the amount of coverage they will provide.
Changes to the Application process
According to a U.S. News article, several insurers are being more careful about covering people who face greater medical risks. For example, people who have had COVID-19 symptoms or tested positive for the virus generally need to be symptom-free for a month or more before an insurer will write their policy. Other insurers require you to wait for 30 to 90 days before applying if you have been exposed to anyone with COVID-19. While not a change, many life insurance applications ask about your travel plans and history. This may impact whether or not you need a medical exam.
What Happens If I Lose My Job?
Unfortunately, this is a difficult question to answer and depends on a number of factors. If you lose your job, you may have several options. Depending on the coverage your employer offered, you may be able to convert your policy to a whole life policy. This allows you to keep coverage even after you leave your job.
Will The Cost of New Insurance Plans Go Up?
A recent Business Insider article quoted several online insurance providers stating that the cost of life insurance should not rise for young healthy people. Life insurance prices are generally based off the age and health of an individual. Those who develop a severe case of COVID-19 with lingering complications and then apply for insurance can expect to pay a higher premium.
What Should I Do?
If you do not already have life insurance, now may be the right time to apply. It’s important to be 100% honest in your application. Otherwise, your policy may be cancelled and your beneficiaries may not receive the death benefit. If you already have insurance, you should review your policy to ensure it adequately covers your risk. Your Keller Stonebraker associates can help you review your options and find the best coverage for your needs.