Do you wonder about the implications COVID-19 will have on your life insurance coverage? Do you know that many insurance companies are beginning to increase their rates? In this article I will answer some of the questions I have been receiving over the last five months and provide you my advice.
Will I be covered if my death is related to COVID-19?
Yes. An active life insurance policy will pay the death benefit, regardless of the cause of death. The only exclusions on a standard life insurance policy are misrepresentation and suicide, within the first two years of the policy being in force. Once you have a life insurance policy in force, you can rest assured that your loved ones will be taken care of financially, even in the wake of a pandemic.
Will life insurance premiums increase due to COVID-19?
Yes. Some companies have increased their insurance premiums significantly already. In July, Sun Life increased some of their permanent life insurance rates by 27%. The signs are pointing to other insurance companies following suit. The main reason for the increase is actually low interest rates. The same low interest rates you enjoy on your mortgage are causing insurance companies to increase their premiums.
Canadian life insurance companies are required by law to make only investments that are “reasonable”, in order to “avoid undue loss or risk.” They are not allowed to invest in real estate or stocks. As a result, insurance companies invest most of their assets in conservative investments like bonds that hinge on interest rates. When interest rates remain low for an extended period, they see less profit and are required to increase premiums.
Have any changes occurred in underwriting?
In some ways, qualifying for life insurance now is easier than it was before COVID-19. You can apply for up to $2,000,000 without providing a blood and urine sample (depending on your age). The only requirement will be to answer some personal health questions via a telephone interview. If you plan to travel out of the country, this may slow down your application. Depending on where you plan to go or have gone, your application may be postponed until the underwriter feels the trip is no longer a risk.
If you have already tested positive for COVID-19, the underwriter may issue your policy at a higher premium or possibly even postpone issuing your policy until the risk is reduced. Regardless, it never hurts to apply.
Is now a good time to obtain life insurance?
Yes. Since most companies have not increased their rates yet, now is the best time to apply for coverage. Industry experts have suggested that life insurance is currently under-priced. The value you receive for one dollar of life insurance premium is much higher than usual. This makes for a great time to reassess your insurance needs.
I am not suggesting that everyone immediately purchase life insurance. If you have no need or purpose for life insurance coverage, then you should not buy it, whether it is a good deal or not. But, if you have loved ones who rely on you financially, you should reassess your insurance needs to ensure you have the right coverage as well as the right amount of coverage. For those who have continued to procrastinate by pushing the necessity for life insurance down on their “to-do” list, now may be the right time to look at your options.
Do you have other questions?
Please feel free to contact me. I am here to help and provide insurance advice from a Christian perspective. I will be happy to review your insurance needs with you when you are ready to do so. We can meet virtually or in person, following Alberta Health’s safety protocols. It is important to review your insurance coverage every three to five years to ensure you have the right coverage for your needs, and to confirm that you are not under or over insured.
Ryan Van Niejenhuis, BA
Credential Financial Strategies Inc.
Credential Financial Strategies Inc. offers financial planning, life insurance and investments to members of credit unions and their communities. Your insurance contract will provide details of the coverage available under the plan you choose. Restrictions may apply. The information contained in this article was obtained from sources believed to be reliable; however, we cannot guarantee that it is accurate or complete. This article is provided as a general source of information and should not be considered personal advice. Please speak to your Credential Financial Strategies Representative or personal financial representative before making any financial planning decision or implementing any strategy.