Coronavirus and Life Insurance: What Is the Impact?

As of October 19, 2020

There’s no doubt that 2020 is not the year people expected when they celebrated this January. A global pandemic, mass unemployment, financial struggles, and tragic loss of life has forced Canadians to take hard looks at their future planning – from  financial security to how they care for their loved ones. For many, this thought process includes considering life insurance. 

As COVID-19 (often referred to as the coronavirus) updates become world news, you may start to think about buying a life insurance policy or wonder how an outbreak might shape the policy you already have.

First of all, you aren’t alone. Life insurance sales are surging right now as people are thinking: How can I financially prepare myself, and my family, just in case?

Let’s talk about the most frequently asked questions when it comes to COVID-19, and how they will impact any existing policyholders or new applicants!

Why are People Considering Life Insurance More Now?

The coronavirus has changed nearly every a spect of life for Canadians. Daily cases continue to fluctuate, and the uncertainty has people looking for ways to protect themselves and their loved ones more so now than ever. 

The government has been quick to respond, but the pandemic has caused a huge spike in people seeking out life insurance – between February and March, applications for term life policies through PolicyMe increased by 70%! But the motivation behind this decision breaks down into a few ways:

  • More Canadians are aware of threats to life
  • The sharp changes to the economy have forced people to critically look at their financial situation
  • The loss of jobs has made people concerned about also losing life insurance provided by employers
  • The risk of becoming ill with COVID-19, and not being eligible for future coverage if infected

If you want to see more about Canadian attitudes towards life insurance and how they are shifting, you can read more about this survey here.

This is a common concern both for current life insurance policyholders and people looking for coverage now. 

For policyholders, you can rest easy knowing you’re covered, even if you happen to pass from COVID-19 complications. For people applying for life insurance now, you will be paid out for all types of death once the policy is in place, including anything related to complications from COVID-19 or any other disease.

The only exceptions are ones that were put in place before the pandemic and remain the same now. These are death by suicide in the first two years or if your policy includes a clause excluding a specific cause of death –like a skydiving accident if you’re a pro skydiver. These apply to people entering the pandemic with an insurance plan in place or new policy holders. 

That is great news! Whether you’re just coming off a cruise, travelling to a risky area, or the virus has already hit home, life insurance companies will cover you. You can sleep soundly knowing that this doesn’t change.

Are There Any Changes to the Life Insurance Application Process for Canadians?

For most people, no – the standard life insurance application remains for people applying right now. However, travelling to destinations on the Government of Canada’s COVID-19 warning list can impact the life insurance application process. At this time, recent or future travel to COVID-19 'hot spots' could cause your insurance company to postpone your approval until some time has passed after your safe arrival home.

It is also likely that your insurer will want to know the specifics related to any planned travel over the next 12 months. If you are applying, it would be beneficial to record planned travel location details, like cities or regions, and timing before starting the application process!Remember, always tell the truth during the application process. If you withhold information, contract coronavirus after travelling to a risky destination, and pass away from it, the life insurance company has the right to refuse to pay out the death benefit to your beneficiaries.

What If I’ve Already Contracted COVID-19?

If you tested positive for COVID-19 before you applied for life insurance coverage, you might end up receiving a lower health rating and a costlier life insurance policy. Some life insurance companies may even postpone your approval until you have made a full recovery. Regardless, it doesn’t hurt to apply.

However, if you get sick and make a full recovery, we expect that the price difference in life insurance premiums will be minimal when you apply later.

Are There Any Changes to Approval Rates for New Applicants?

At this time, approvals are coming in at the same rate as the last few months, even as the number of applicants has grown. The industry average for life insurance policy approvals sits around 80% – an average across all types of policies! If you are in good health, this tends to be even higher. 

If the situation changes, we’ll provide updates.

Will this Affect Approval for Someone with a Severe Medical Condition?

Shopping for a life insurance policy can be especially intimidating for anyone recently diagnosed with a severe health condition such as a heart attack, cancer or a stroke. You may be seen as ‘high-risk life insurance’ to insurance providers, and the risks associated with coronavirus are higher for people who already have underlying health conditions. 

For many high-risk life insurance shoppers, they tend to turn to no medical life insurance. Simplified issue or guaranteed issue products are life insurance policies that do not require medical exams (or sometimes even medical questions) to qualify. 

While these policies tend to approve everybody, the tradeoff is that the policies are much more expensive than traditional term life insurance. They tend to cap you on the total amount of coverage you can buy. If you’re unable to purchase regular term insurance, a simplified issue or guaranteed issue life insurance policy could be an excellent way to get some life insurance coverage and a small death benefit for your family. Canada Protection Plan is a leading provider of No Medical & Simplified Issue Life Insurance in Canada. That means that they do not require the extensive medical telephone exams needed with the other insurers in Canada. 

Have Life Insurance Prices Increased as a Result of Coronavirus?

As life insurance applications continue to rise, so does the concern around the price of these. It’s supply and demand – as more people demand life insurance, are prices going up?

If you already have a policy, then no! The rate you signed on for a monthly payment will remain the same, even during the coronavirus pandemic. This is why signing young is so importat. You get to lock in that lower rate! 

If you’re shopping for a new plan, prices have stayed stable up until this point, despite the additional risks associated with COVID-19. However, this isn’t a blanket statement. Some companies have hiked prices for certain permanent life insurance policies up to 27% for new applicants. Prices for term life insurance across the board haven’t seen this increase. 

However, Andrew Ostro, co-founder and CEO of PolicyMe, has said premiums in the future could increase 20% – it’s important to lock in the cheapest possible rate now to avoid this inflation. If you decide to start shopping now, to avoid this price increase, comparing prices is more important than ever to ensure you're getting the best value possible. Make sure you’re looking at different providers and getting quotes personalized to yourneeds.

Should I Buy Life Insurance During a Pandemic?

We wouldn’t suggest that everyone should drop whatever they’re doing and immediately start shopping for a life insurance policy. The truth is, if you don't have a life insurance need (and many don’t!), then you should never buy it, regardless of how good the value currently is. 

If you have dependents that rely on you financially and have been putting off applying, now might be the right time to do so.

If you want to get answers to some more common life insurance FAQs before you start shopping, you can click here to read through our guide on life insurance in Canada.

How Do I Get a Life Insurance Quote?

The good news is that life insurance quotes are pretty readily available! While finding quotes can be pretty easy, trying to compare the quotes and understand what each one offers can be downright confusing.

There are several places to get life insurance quotes. Many companies will even give you instant life insurance quotes online, which is great especially now as people are encouraged to limit unnecessary outings and stay safe at home. Here are some of the major places to get quotes from:

  1. You can go directly to a life insurance company online (like TD bank)
  2. You can go through an independent local insurance agent
  3. You can buy insurance from an independent broker online

Can I Buy Life Insurance Without a Broker?

Nearly everything is at your fingertips online now, and life insurance is no different. You can use online brokerages to compare prices and get quotes. This will help you find the best deal for your needs!

In fact, if you’re starting your life insurance shopping, the best advice anybody can give you is to shop through an independent source, either in person or online. Agents who work for a single life insurance provider won't help you compare quotes from a variety of companies to make sure you get a reasonable price. If you do the research online for the best life insurance for your needs to compare prices, you’ll likely actually end up with a price.

As coronavirus evolves, it’s very possible the industry will shift as well. Policies can vary widely across companies for the same type of policy and each policy should take into account your individual needs. Unless you want to spend more than you have to on life insurance, it’s essential to shop around and compare quotes.