April 5, 2023

Has Purchasing Life Insurance Changed Since 2020?

Chris Lubell

Many people are concerned about the potential impact COVID-19 may have on their life insurance during this difficult and stressful time. Some people may be concerned that the insurance companies may alter their current policy because of coronavirus worries, which could lead to an increase in their premiums or a limitation on their coverage. Everyone should find comfort in the fact that insurance companies typically are unable to alter the contractual terms of active insurance plans.
However, this does not imply that future products won't be altered to safeguard the insurer against unforeseen circumstances, nor does it imply that insurance companies will continue operating as usual. They might alter their upcoming products as a result of their COVID-19 experience, but these modifications are unlikely to happen right away.

Actuarial (mortality) tables are used by insurance companies to price their products. There is a chance that the actuarial tables may need to be changed, which would require an increase in rates, after this global crisis is finished and all the data has been reviewed. It might take some time, but if you take into account the fact that life insurance costs are increasing annually as you age, one thing is for sure: life insurance will cost more in the future.

Knowing that life insurance companies in Canada are required by the Office of the Superintendent of Financial Institutions (OSFI) to run a pandemic scenario every year may be consoling. Pandemics are predicted to occur once every 100 years. The modelling would seem to be accurate given that the Spanish Flu, the last significant global pandemic, ended in 1919. Due to the testing, life insurance firms have significant reserves for pandemics and are unlikely to raise premiums just because of Covid-19 because it is already factored into the cost.

The process of underwriting, which involves evaluating and approving an insured person for coverage, may pose the most immediate difficulty in acquiring new life, disability, and critical illness insurance.

Companies offering life insurance want to work with certainties.

Although COVID-19 may resemble other viruses, it is novel and different. When asked about this virus, many medical specialists begin their responses with the phrase "We just don't know." Some have hypothesised that your future health may still be affected by COVID-19 even after you recover.

In the future, insurance companies might change a few of the medical history-related questions on their life applications. Applications for critical illness insurance or disability insurance may be significantly impacted by this. It's probable that both the number of policies issued with exclusions and their price may rise.

I'm requesting new insurance today.

Since 2020, applying for life insurance has been simpler. To provide a life insurance policy at conventional rates, life insurance firms need to see adequate medical documentation. This often entails a paramedical examination (including blood and urine tests) as well as, if applicable, a report from any physicians who have previously treated the applicant.

When the Covid epidemic was at its worst, the major paramedical examination service providers stopped offering in-person exams, which also eliminated the chance to have the potential insured submit to blood or urine tests.

Thankfully, a lot of life insurance companies increased the amount of coverage that could be obtained without a physical or providing body fluids. Although the insurance provider maintains the right to request more details and requirements, for many cases, a phone interview was sufficient.
The majority of insurance firms have maintained their Covid-19 underwriting processes in place, resulting in a less invasive application process, even when social distancing rules have been scaled back or repealed.

Travelling internationally: Fears

Any recent or upcoming overseas travel to a nation that might be mentioned on the Canadian government's travel advisory website must be disclosed to life insurance firms by the applicant. This would include nations where a recent or ongoing outbreak of Covid or another contagious disease is occurring. If you're applying for life insurance and you've recently travelled to one of these nations, your application will probably be delayed for at least one month. Your application can be delayed until 30 days after your return if you intend to go to one of the nations on the travel warning list.

What else might occur?

In the future, insurers might include clauses protecting them from unforeseen or extraordinary losses in their policies. Hopefully, this won't occur, but nothing is guaranteed at this time.

Do you want to purchase additional life insurance now or wait?

Many people want to make sure their families are adequately protected because they feel more financially insecure at the moment. The important message is that you shouldn't let the immediate difficulties deter you from increasing the amount of your life insurance coverage.
If you have any inquiries, get in touch. As always, feel free to spread this information to anyone you believe would be interested in it.

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