During this stressful and challenging time, many are wondering what effect COVID-19 could have on their life insurance. Some may be worried that the insurance companies would make changes to their existing policy due to coronavirus concerns, resulting in an increase in their premiums or a restriction to their coverage. It should be reassuring to all that insurance companies are generally not able to change the contractual provisions of the insurance policies that are in force.

This does not mean, however, that future products will not be changed to protect the insurer against unforeseen events, or that the insurance companies are doing business as usual. It is possible that they could make changes to their future products as a result of their experience with COVID-19, but these changes are not likely to be immediate.

Insurance companies rely on actuarial (mortality) tables to price their products. Once this world crisis is over and all the data is processed, there is a possibility that actuarial tables might have to be amended which would necessitate an increase in premiums. This may take some time, but if you consider that the cost of life insurance is going up each year as you get older, one thing is certain, life insurance will cost more in the future.

It may bring comfort to know that in Canada, life insurance companies are required by the Office of the Superintendent of Financial Institutions (OSFI) to run a pandemic scenario each year. It is assumed that pandemics will occur once every 100 years. Considering the last major global pandemic was the Spanish Flu ending in 1919, the modeling would appear to be accurate. As a result of the testing, life companies are adequately reserved for pandemics and since it is already built into the pricing, unlikely to increase premiums solely due to COVID-19.

The immediate challenge in obtaining new life, disability and critical illness protection could be in the area of underwriting – the process of assessing and approving the insured for coverage.

Life Insurance Companies Prefer to Deal with Certainty

While COVID-19 might be like other viruses, it is new and unique. “We just don’t know” is how many medical professionals preface their reply to many questions about this virus. Some have suggested that even after recovering from COVID-19 there might be some delayed impact on your future health.

Going forward, insurance companies may amend some of the questions on their life applications dealing with medical history. This could have a significant effect on disability insurance or critical illness applications. It is possible that we may see an increase in policies issued with exclusions as well as an increase in cost.

Applying for New Coverage Today

Applying for Life Insurance got easier since 2020. Life insurance companies require satisfactory medical evidence in order to issue a life policy at standard rates. This usually involves a paramedical exam (including blood and urine tests) and possibly a report from any doctor who has treated the applicant.

During the height of the Covid pandemic the major providers of paramedical examination services suspended the face-to-face examination which also meant no opportunity to obtain blood or urine tests on the proposed insured.

Fortunately, many life providers increased the amounts of coverage that could be purchased without having to be examined or provide bodily fluids. The insurance company reserves the right to ask for additional information and requirements, but for many applications, a telephone interview was all that was necessary.

Even though social distancing restrictions have been reduced or eliminated most insurance companies have kept their Covid-19 underwriting protocols in place resulting in a less invasive application procedure.

Concerns With International Travel

Life insurance companies require an applicant to disclose any recent or imminent international travel to a country which might be listed on the Canadian government travel advisory site. This would include countries with a continuing or recent outbreak of Covid or other communicable diseases. If you are applying for life insurance and you have visited any of these countries in the past 30 days your application is likely to be postponed for a minimum of one month. If you are planning to visit one of the countries on the travel advisory list, it is possible that your application would be postponed until 30 days after your return.

What Else Could Happen?

Possibly insurers could build into their future policies provisions that would protect them from unexpected or unusual losses. Hopefully, this will not happen, but at this point, nothing is certain.

Should You Buy Extra Life Insurance Now or Wait?

Many people are feeling more financially vulnerable right now and want to make sure they have adequate protection for their families. The bottom line is, if you have been considering increasing the amount of your life insurance coverage don’t let the immediate challenges stop you.

Reach out if you have any questions. As always, please feel free to share this information with anyone you think would find it of interest.