Could Life Insurance Get More Expensive in the Wake of COVID-19?

It's more than possible. Here's why.

At this point, it's pretty fair to say the problem of COVID-19 is not going away. Granted, there are protections in place that make the virus less of a major health threat. These include widely available vaccines and approved medical treatments. Plus, many people, at this point, have some amount of immunity to the virus, and while that doesn't eliminate the risk of severe infection, it might lower it to some degree.

But while society is certainly learning to cope with the presence of COVID-19, the reality is that the virus has the potential to change the life insurance landscape. And that's something future applicants should be mindful of.

Will COVID-19 make life insurance cost more?

Life insurance companies take on a certain amount of risk when they write their policies. And any time a given candidate presents as a higher risk, life insurers tend to respond by demanding higher premiums to put coverage into place.

This makes sense. If a given candidate presents with multiple health issues, the likelihood of them passing away and a life insurance company having to pay out a benefit is greater. But now, with COVID-19 in the mix, life insurance companies might face challenges when writing policies. They'll have to figure out how much general risk to account for, given the fact that the virus seems to be here to stay.

CNBC, citing data from the American Council of Life Insurers, reports that U.S. life insurance companies paid over $90 billion to life insurance beneficiaries in 2020, representing an increase of 15.4% compared to 2019. Payouts then increased nearly 11% in 2021, rising to over $100 billion.

The mortality rate associated with COVID-19 during the early stages of the pandemic isn't necessarily reflective of the virus's long-term mortality rate. After all, in 2020, vaccines weren't in the picture. And they certainly weren't widely available for some of 2021. 

Plus, treatments have evolved since the early stages of the pandemic. So all told, the hope is that in time, COVID-19 will become less of a threat and more of a nuisance virus to deal with.

But still, because it's such a relatively new virus, it's hard to determine how it will impact mortality rates. And there's also the long-haul aspect of the virus to consider when writing policies. 

Long COVID symptoms can wear on immune systems over time and cause health problems. And long-haul symptoms could also cause major depression, potentially leading to an uptick in sufferers taking their own lives.

So many unknowns

At this point, it's too soon to put a definitive number on what COVID-19 and its associated symptoms and backlash will cost the life insurance industry. But it's fair to assume the presence of the virus will be taken into account when writing future policies.

That's something applicants will need to prepare for. And they may find that their costs are higher as a result. 

Of course, there are steps life insurance applicants can take to keep their premium costs down. These include shopping around, improving their health, applying at a young age, and opting for term life insurance over whole life policies, as those tend to come at a far more affordable price point.

But all told, the cost of putting life insurance in place has the potential to rise. And consumers need to be ready for that.