COVID-19 turned all of our lives upside down and caused varying levels of mental, emotional, and economic strain. Months after the initial lockdowns, people and businesses are still feeling the effects – and it's having an impact on life insurance.
Options if your client can’t afford premiums
First, let's talk about what to tell clients who can't afford to pay their premiums. As the pandemic wears on, times are getting tough and many individuals are facing financial challenges. Clients might be thinking twice about their life insurance policy and whether or not they can afford their premium payments. Before dropping a policy, the client needs to understand that they have options. First, they may be able to change their premium payment schedule. If they have been paying annually or quarterly, for example, they may be able to switch to monthly payments to ease the burden of coming up with a larger lump sum once per year or each quarter.
If they still can’t afford the premiums and are considering letting it lapse, then you should recommend a policy appraisal. Explain to your clients that they do not want to let their insurance policy lapse. I'm going to repeat that: Do not let their insurance policy lapse. Why? Because the policy may be worth more than the cash surrender value. Your senior client might be sitting on a sizable life insurance settlement. Most people don’t know that there's a secondary market for life insurance policies. For many seniors, there's a very good chance that someone will pay for that policy. So advise them not to let it lapse. Get it appraised because they might get financial relief from the very thing that’s causing a financial burden.
If your clients have a short-term issue with their premium payment, let them know that most insurance policies have a grace period, usually 30 days. And if they reach out to their insurance company, they may even extend that out as a short-term solution. Also, if they happen to let their policy lapse, it may be possible to get it reinstated. Most insurance insurers will accept a reinstatement application within a three to five-year period.
Some insurance is being offered without a medical exam
Concerns about COVID-19 have changed the way some insurance companies are operating. Not only are medical examiners not interested in visiting people's homes, but potential insureds don’t want strangers in their houses either. Some insurance companies are offering new policies without a medical exam. If clients are interested in replacing their coverage, now might be an opportune time. We recommend getting a policy appraisal for the current policy, and then determine if they can get replacement coverage, perhaps without a rigorous medical exam. While not a typical scenario, it may be possible to get a payout for one policy and replace it with a similar or even lower-cost option. It all starts with an appraisal and understanding the options.
Still unclear what this means for rates
Because there is still no cure for COVID-19 and we still don’t know the long-term health issues related to recovering from it, we don’t know how the pandemic will impact overall life insurance rates. One thing we do know is that the actuarial wheels of the life insurance industry turn very slowly. Many experts have already stated that they don't believe that we are going to see many changes in the cost of life insurance, at least not in the very in the short term. The pandemic is unprecedented, but COVID-19 is still fairly new, so we don’t know how it will impact life expectancies and actuarial tables at this time.
In summary, when it comes to COVID-19 and seniors with policies, here are our recommendations: 1) Get a life insurance policy appraised so clients understand the policy’s worth, particularly if they are struggling with payments and might let it lapse. 2) If they are interested in getting new coverage, it might be a good time because a lot of companies have waived medical exams. 3) Don’t panic about rates going up for new coverage because we don't expect that to happen in the short term.