En español | Older adults in the market for life insurance have fewer options than they did before the coronavirus outbreak. Several of the country's largest insurers are suspending or delaying applications for new policies based on age, citing the greater risk posed by COVID-19 to people 65 and older.
Prudential, Lincoln National and Mutual of Omaha are among the companies putting limits on sales to people in their 70s and up. And some firms are holding up policy requests for people under age 70 who have health conditions that increase the risk of their dying from COVID-19, says Frank Kumpuris, vice president of life operations at Policygenius, an online insurance marketplace.
Insurers say the moves are temporary and are rooted in their need to manage risk amid the evolving outbreak and ensure that they can meet obligations to existing policyholders.
"We do not take making these changes lightly and did so after considering the impact on our prospective customers and business,” says Jeff Bakken, public relations manager at Securian Financial, which is not taking applications for life policies from individuals age 71 and over through at least June 15. “We will revisit this decision as the impact of the pandemic becomes clearer."
The restrictions apply only to people shopping for new policies. If you already have life insurance, the death benefit will be paid should you succumb to COVID-19, regardless of your age.
Rising mortality risk
Age generally plays a role in the cost of life insurance. Each year you delay purchasing a policy, the amount you pay in premiums goes up an average of 8 percent to 10 percent, according to Kumpuris.
"In light of COVID-19, insurers are reevaluating their ability to pay a potentially higher claims rate for new clients who are above a certain age and weighing that against the demographic profile of their existing businesses,” he says.
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According to the Centers for Disease Control and Prevention (CDC), people age 65 and up are at higher risk for severe complications from COVID-19, the respiratory illness caused by the coronavirus, particularly if they have underlying health conditions such as diabetes, asthma, serious heart conditions or chronic kidney disease. As of April 28, that 65-plus age group had accounted for 79 percent of U.S. COVID-19 fatalities, a provisional count maintained by the CDC found.
"The guarantees made to policyholders obligate life insurers to consider new factors impacting mortality when they arise,” says Paul Graham, senior vice president of policy development at the American Council of Life Insurers. “But even as COVID-19 threatens the health of millions of Americans, coverage is available,” he adds. “A person unsatisfied with the response from one company can always visit another. And keep in mind, if an application is delayed because of COVID-19, it is not a rejection."
Lincoln National, for example, continues to accept applications from all age groups, and the applications remain open for a year. But the company is postponing approvals for those 80 and up. A spokesman said that Lincoln will “reevaluate our position as the COVID-19 pandemic evolves."
A spokesman for Mutual of Omaha says its move to suspend sales of fully underwritten life policies to applicants age 70 and over was based on guidance from reinsurers — companies that insure insurers and share in the risks of underwritten policies. Underwriting requires a medical exam and other health information to establish premiums.
Mutual of Omaha continues to sell non-underwritten whole-life policies, a “much more common life insurance choice for seniors,” regardless of age, the spokesman says.
Prudential has temporarily restricted new applications from people 80 and older. A company spokesman says this group accounts for 0.1 percent of Prudential's sales volume. Protective Life has also paused approvals for consumers 80-plus.
"We constantly monitor our pricing, product availability and underwriting standards across all age groups to ensure we are appropriately managing our risk and can fulfill our commitments,” says Brad Gabel, Protective Life's chief underwriting officer.
AARP asked about a dozen other major insurers if they have made any age-related changes in their application or approval procedures. Of those, Guardian Life, MassMutual, Nationwide and State Farm say they are not suspending or delaying applications based on age. Two firms, Pacific Life and Penn Mutual, declined to comment.
While insurers are risk averse, “those with relatively stronger balance sheets might set age-related changes at a higher age … or hold off on any age-related changes for the time being while continuing to monitor this evolving situation,” Kumpuris says. “This is an unprecedented situation, so it's challenging to predict what insurers will do as the situation evolves.”