Life Insurance Underwriting Amid a Pandemic
Consumers' interest in life insurance has increased as a result of the coronavirus pandemic. According to a 2020 PwC survey, 15% of respondents said they were likely to purchase life insurance as a result of COVID-19. Simultaneously, the pandemic has made the life insurance underwriting process more difficult, particularly in-person health exams, and has changed the way many consumers now go about purchasing a policy.
How Traditional Life Insurance Underwriting Works
Life insurance underwriting is the process by which an insurance company evaluates a person's risk factors in order to determine how much to charge them for coverage. This includes an evaluation of both lifestyle risk factors (such as having a dangerous occupation or hazardous hobbies) and health risk factors.
When applying for life insurance, whether term or permanent, you will most likely be required to undergo a paramedical exam. This exam is intended to provide an overview of your overall health and frequently includes blood and urine samples, as well as height and weight measurements.
You may also be asked to complete a health questionnaire to assess your risk of developing serious health problems later in life. The insurance company may also inquire about your lifestyle.
The insurance company uses all of this information to determine how much you'll pay for insurance. In general, the younger and healthier you are, and the fewer risk factors you have, the lower your life insurance premiums will be.
Life Insurance Underwriting During a Pandemic
The COVID-19 pandemic has resulted in the implementation of social distancing guidelines, which encourage people to keep a minimum 6-foot distance between them. Those guidelines have posed a challenge to traditional underwriting for life insurance companies, particularly with regard to in-person health exams.
According to a survey conducted by LIMRA, an industry trade association, two-thirds of life insurance providers have changed their underwriting policies to address the lack of access to health exams. In lieu of in-person testing, insurers are increasingly relying on physician statements, phone interviews, or FaceTime screenings to determine the health status of their applicants.
According to the survey, two-thirds of life insurance companies that have changed their underwriting approach are increasing automated/accelerated underwriting limits to make larger policies available. Overall, people looking for life insurance during the pandemic may find it easier and faster to get the coverage they need.
No-Exam Life Insurance During a Pandemic
No-exam life insurance is a type of life insurance that you can buy without having to take a medical exam. These policies existed prior to the coronavirus pandemic and are an option to consider in addition to traditional term or permanent life insurance.
In the case of no-exam policies, you must fill out a health questionnaire. The life insurance company will review your answers, as well as your medical history, to determine your risk class and how much to charge you for insurance.
The benefit of purchasing a no-exam life insurance policy during a pandemic is that you won't have to worry about a health exam or social distancing requirements. You can apply for no-exam life insurance online and receive a decision within a few business days.
The disadvantage of no-exam life insurance is that the premiums may be higher than for traditional coverage. Without a medical exam to assess factors such as cholesterol levels or body mass index, the insurance company may take on more risk and charge you more for coverage.
How to Buy Life Insurance During a Pandemic
If you want to buy life insurance during the pandemic, there are some important questions to ask first. As an example:
- Is term or permanent life insurance better suited to your needs?
- How much coverage do you believe you'll require?
- Are you looking for no-exam life insurance or a traditional life insurance policy?
- What kinds of premiums are within your price range?
- Are you looking to add any riders or specialized coverage to the policy, such as a long-term care rider?
Term life insurance is an option to consider if you only need coverage for a set period of time, such as 20 or 30 years. Permanent life insurance can provide lifetime coverage as well as the possibility of cash value accumulation. The catch is that permanent life insurance typically has much higher premiums than term life insurance.
The amount of coverage you require will obviously vary from person to person, but you may want enough to cover funeral expenses, settle any outstanding debts, and provide your dependents with enough income to cover their living expenses for a number of years after you die. Many financial experts recommend having insurance equal to 10 to 15 times your annual salary as a general rule of thumb.
As you look for a policy, consider getting online quotes from the best life insurance companies. This is a simple way to compare prices and find the most affordable coverage. However, keep in mind that these are only estimates, not final prices. To determine what you'll actually pay for life insurance, you'll need to complete the insurance company's application and underwriting process, whether or not it includes a health exam.