What’s the impact of Covid on life insurance rates? I asked Lloyd West, President Emeritus of Plus Financial Network, nationally respected expert and the dean of Michigan life insurance agents.
Lloyd says:
“There is no doubt that the Covid pandemic has had significant impact on the mortality experience of US Life Insurance carriers. And I suspect that it will and has had an effect on their bottom line. But, keep in mind that reserving requirements have lessened the impact.
“Companies did institute more conservative guidelines on underwriting new business and many companies have adjusted pricing up on new products. We have not seen an increase in mortality costs on inforce policies, but rather reductions in interest rates credited [Gary’s note: Hmmm, this is their left-handed way of doing the same thing, because reducing credited interest rates shores up the companies’ bottom line by making the policies perform less well in the long run. Let me be blunt. Their intended result is to silently, without any fanfare, require existing policyholders to pay in more premiums. If they don’t, their death benefit may disappear long before mortality].
“Also many carriers have exited the GUL [Guaranteed Universal Life] market totally, or increased pricing on new policies. Interestingly several carriers have reduced premiums on term insurance but almost entirely on Pref Best and Preferred rates.”
What this means to the practicing CFP® is that this is a time to act. Locking in guaranteed premiums (where indicated of course) to expected mortality age makes a lot of sense. Permanent rates are not going down. Term rates are still attractive.
Many financial planning problems that life insurance now neatly solves will be a lot more complicated as certain types of policies become more expensive or unavailable at any price.
Life insurance is a great product that fills a critical role in a financial plan. But make no mistake: life insurance companies are in business to make money, and if a consumer chooses a non-guaranteed product in order to save money, they can get screwed when conditions change. The carrier has several ways to change the way their policy performs. Like my grandpa used to say—“Get it in writing!”
I hope that is clear enough!
Please contact me at any time. I love to be a resource for your life, disability and long term care questions. Qualified to review policies, no cost or obligation.
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