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Life Insurance

The Impact of COVID-19 on Life Insurance

2021-10-03

Servicemembers, especially those deployed overseas, might think a bit more about life insurance than the average citizen, but it’s still not a top-of-mind topic in most day-to-day situations. For many, the COVID-19 pandemic has changed that, especially among the younger demographic. With the pandemic causing increased uncertainty, individuals are looking for ways to protect their loved ones and better understand how they are covered.

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How has the pandemic affected the life insurance industry?

Since the onset of COVID-19 in early 2020, trends surrounding how individuals purchase life insurance policies have changed. There has been substantial growth in the number of people taking out new life insurance policies, though these increases were not immediate. According to a JD Power Study of US consumers, most Americans remained unmotivated to buy life insurance in the early months of the pandemic, especially in March and April 2020.

However, as the pandemic began to spread, MIB’s Life Index found that life insurance applications rose by 4% in 2020, which was the largest full-year increase in over a decade. Policies spiked in July 2020 by 14.1%, followed by a 7.6% jump in October 2020.

Interestingly, the largest growth of new policies came from younger adults:

  • 7.9% increase among age 44 and younger
  • 3.8% increase for individuals ages 45-59
  • 1.7% decrease among age 60+

Despite the pandemic and the correlating growth in policies issued, many Americans still either have no life insurance or not enough coverage to fully cover their household expenses. These two groups — the uninsured and the underinsured — are referred to as the “underserved life insurance market.”

Key COVID-19 Pandemic and Life Insurance Trends

According to LIMRA, the difference between the amount of life insurance people in the US have versus the amount they need is significant — $12 trillion industrywide. The average deficit between the coverage amount they have and what they actually need is about $200,000.

Since COVID-19 began, younger individuals appear to be more interested in increasing their death benefit due to the pandemic, possibly because these groups have minor children and larger mortgages. Another reason may be due to higher unemployment rates among these groups, which means they also lost their employer-provided policies.

It’s possible the pandemic has also helped younger people understand the need to get policies while they are healthy. With COVID-19, death is not the only issue. The virus attacks the body in a variety of ways, and can cause damage to the heart, lungs, kidneys, liver, brain, nervous system, and other organs. Reports estimate that up to 25% of COVID patients are experiencing “long haul” or “long COVID” symptoms (i.e., ongoing health issues) that last beyond their initial recovery, even among those who had mild cases. Since many life insurance policies require medical underwriting, these long-haul issues could impact future rates and possibly insurability.

RelatedCOVID-19 FAQs: Your AAFMAA Policy and the Coronavirus

In fact, some life insurance providers are requiring applicants to complete a statement of good health before a new policy can be delivered, confirming that there have been no health changes since the initial application. This statement can give insurance providers the ability to contest the policy payout due to a COVID-19 death within two years after the initial policy date.

Buying Life Insurance During COVID-19

COVID-19 has brought the need for both physical and financial protection. If you don’t have life insurance already, there’s no better time to apply than now. COVID-19 can cause long-term health issues, which could make it harder to get life insurance later on, so the earlier you get it, the lower your rates will be. 

RelatedAAFMAA Is Here For You During COVID-19

As a servicemember, you may already have life insurance coverage through the military. However, is it enough? A supplemental life insurance policy is a smart option to fill in the coverage gaps just in case. At AAFMAA, we offer a variety of life insurance products designed exclusively for servicemembers and Veterans to ensure your loved ones are financially protected. Contact the Life Insurance experts at AAFMAA to learn more about how much coverage you need and which plan can serve you best.