The number of people with life insurance dropped despite increased public health concerns and pandemic deaths. Learn what may be behind the decreased numbers.

We covered in our earlier blog how queries into life insurance have soared in the past year. There was a 4% national increase in insurance sales in 2020, with 83 million Americans either considering buying life insurance or boosting their existing protection during the pandemic. But 2021 data has revealed a gap in the number of adults locking down a policy. 

What exactly is a “life insurance gap,” and what could be stopping so many people from obtaining coverage in a pandemic? Let’s look at the numbers alongside some possible hurdles and reasons for fewer policies.

The two meanings of a life insurance gap

The term “life insurance gap” often simply means the lack of a death benefit or the presence of an insufficiently large one. It is not uncommon for couples and families to be in a position where, should the primary (and sometimes sole) financial provider pass away, they would not be able to meet their financial requirements and obligations independently.

The second kind of life insurance gap refers to how many people are opening policies in the first place. That number has dropped recently despite Americans’ greater concern for their health in the wake of a pandemic. Today, around 60 million families are without coverage or don’t have enough to protect them following a death, according to the Life Insurance and Market Research Association (LIMRA).

LIMRA reported in February that seven life insurance trade associations (a number that has since increased to eight) had united to help Americans get life coverage in place more easily. This equates to over 60 large insurance companies and their distribution partners. It’s a promising effort during trying financial and medical times when only 54% of people have life insurance, a number that’s down by almost 10% from 2011.

Some factors may explain the lower life insurance numbers — reasons beyond the usual deferments of being too expensive or too early/too late to budget for.

The other side of the pandemic’s influence

A gap in life insurance levels following a global pandemic seems strange until we look at the broader impact of COVID-19 on the industry. The fact that fewer coverage plans are being established may not be for want of people trying. There’s no widespread data to support this, but there are significant precedents from last year.

Providers’ public announcements say the pandemic isn’t significantly affecting applicants obtaining life insurance policies. Yet 2020 saw provider actions that include: 

  • Some insurers declined applicants who had recently traveled or planned to travel outside the United States
  • Requiring a 14-day delay period and receipt of an attending physician statement stating the virus has been cleared following a positive COVID test
  • Some insurers required a signed Statement of Good Health on the date a policy is delivered
  • Some insurers are no longer underwriting applicants aged 70 or above

Providers haven’t said COVID-19 is playing a considerable part in policy refusals. But removing travelers and anyone over 70 from eligibility plus adding new requirements means many people are ineligible, and others may find it more challenging to get a policy.

Other policy hindrances behind the scenes

A December 2020 article by Lydia Wheeler for Bloomberg Wealth revealed that life insurance companies were starting to change the questions on their application forms to ascertain if potential customers had been infected with COVID-19. A lack of accurate data on the long-term health effects of even the mildest cases has industry insiders thinking that anxious insurers may either refuse some life insurance applications or offer plans with significantly reduced coverage.

Providers have denied they’re altering the application process to make it harder for COVID-19 survivors. But the Bloomberg article highlights how even some people with antibodies and no other medical conditions are being denied policy upgrades on COVID-related grounds. This discourages individuals from seeking further coverage, which could lead to an even more significant gap than the current one.

Speak to NICRIS for advice you can count on

The developing pandemic situation will cause ripples in the insurance sector for a long time to come. This makes it more important than ever for coverage seekers to know how this could affect their life insurance applications. Our team offers insight and guidance to answer all your questions. Contact NICRIS at the link below for coverage advice you can trust.

NICRIS Insurance focuses on providing clients with the appropriate suite of products to protect them, their interests, and their loved ones. If you need some insurance advice, drop us a line, visit our offices Monday to Friday 9 to 5, or call (516) 544-0006.