- \ Gerard Gruber
- May 28, 2020
!Life Insurance advisor in CT
Life insurance is a risk management tool designed to protect your dependents should you unexpectedly pass. Life insurance policies become especially important for families when the primary breadwinner works in a high-risk environment or a global pandemic, such as COVID-19, sweeps the globe, essentially putting everyone at risk.
As the severity of the Coronavirus began to take root all over the country, both the public opinion about life insurance and rates for policies began to change. Families are more acutely aware that they could die from the virus, making them more inclined to buy life insurance policies now as a result, but the market downturn and an increased demand for policies have caused rates to increase.
How the Market Affects Policy Rates
Life insurance rates are determined on three main factors: your health, your age, and the insurance company’s ability to remain profitable. A life insurance company’s ability to remain profitable is dependent upon mortality rates, the interest rate environment, and that company’s net revenue. If one of these three things change, the company may adjust rates to remain profitable.
In our current COVID-19 climate, mortality rates have increased due to the virus and the market downturn has put us in a low-interest rate environment. Neither of these is positive for a life insurance company’s bottom line. As a result, we can expect rates to increase. The longer the economy remains weakened, the higher these rates may climb.
Term Policies vs. Permanent Life Policies
Note that the impact the market will have on policy premiums may vary from term policies to permanent policies, largely because permanent life insurance policies offer long-term cash value guarantees and protect the policyholder no matter how long they live. In a depressed market environment, these cash guarantees pose significant risk to a company’s ability to maintain current revenue levels, prompting them to raise their rates.
However, permanent life policies offer greater long-term investment benefits than term policies that expire or lapse after a certain period of time—leaving individuals and their dependents exposed to loss of income due to death and the likelihood of paying higher premiums to purchase a new policy. After all, the older you get, the more at risk you are for health problems. In turn, you will likely pay a higher rate for the same benefit.
Consider a Universal Life Policy with a Critical Illness Rider
Universal life insurance policies with a critical-illness rider are championed by an overwhelming number of financial professionals as they not only provide death benefit protection, but also the ability to access the death benefit if the insured becomes critically or terminally ill. Of course, the Critical Care rider will increase your policy premium anywhere from 10%-20%, but could protect yourself and your family from financial ruin should tragedy strike. This could be especially beneficial if the insured contracts the COVID-19 virus and is unable to work for an extended period of time, putting your family’s financial well-being on the line.
Of course, the best way to decide which policies and riders are right for you are to speak to a financial professional about your individual circumstance. If you already have a critical care policy in place, now would be a good time to look at your coverage and learn if any COVID-19 related illnesses would be covered and provide you benefits.
If you are concerned that you and your family are not well-protected from a loss of income due to death, disability, or a critical illness, we encourage you to reach out to the advisors here at Harbor West as soon as possible. None of us can predict what will happen with the COVID-19 pandemic or what types of future threats could put our health and livelihood at risk. Contact us today to make sure you’re covered.
All guarantees, riders and benefits of an insurance policy are subject to the claims paying ability of the issuing insurance company.