A dramatic decrease in interest rates due to the coronavirus pandemic has led to U.S. insurers denying some Americans looking to purchase a life insurance policy, according to The Wall Street Journal.
The projection is that the interest rates won’t rise enough in the near future to sustain profits at the same pre-pandemic levels.
At the very basic level, life insurance companies invest your premiums into bonds that you then essentially “cash out” when you collect on the policy. If interest rates can’t keep up you can see why they may be more leery to write new policies. Unsure of what interest rates will do in the coming years and what will happen with the number of increased policies coming due, potentially because of COVID- 19 related deaths, they are being precautionary it seems. If they can’t count on the interest being there in bonds in the future they will have no choice, as an insurance company, to then increase your premiums. Nature of the beast right?
Which is why getting a plan now before it may be 1) Unaffordable or 2) Unavailable, is a smart decision to make. Potential shoppers are finding they are unable to purchase specific popular products & prices have increased. They are also starting to see a reduction in policy sizes and reduced benefits.
This is a direct result of the COVID- 19 pandemic.
Lawrence Rybka, the chairman of Valmark Financial Group, was quoted stating “In 33 years, I have never seen more changes come more quickly to the life-insurance products we sell, It is unprecedented how fast and widespread—it is across lots of carriers.”
Some examples of restrictions on Life Insurance policies include:
- Penn Mutual Life Insurance Co. suspending sales to anyone 70 + and in poor health- claiming that an analysis by insurance executives showed that older folks with underlying conditions are dying at much higher rates right now, due to the current pandemic.
- Prudential, largest life insurer by asset in the US, increased rates from 8%-12% to help the company withstand pandemic times. They also temporarily stopped selling their 30 year “term-life” policies-which is a common option for young families.
- American International Group, Inc, Nationwide Mutual Insurance Co, Pacific Life Insurance Co and the Principal Financial Group Inc- all limited the size of a guaranteed universal- life policy- where the guarantee is that the premium price never increases.
In addition to not offering certain policies or benefits any longer companies are also showing a decrease in payout amount on “income annuities,” also known as “immediate annuities”. The interest has dropped 24% since 2005, industry figures show. For example: A 70-year-old man investing $100,000 into one of these contracts for lifetime payments would get $556 a month today; in 2005 it would have been $730 a month.
In this current environment, which is so unpredictable, consumers are appreciating the value of protection products with guarantees. Many companies, including Compass Health, have continued to find clients the products they need at a price they can afford, even during a pandemic.
Have you been on the fence about purchasing a Life Insurance Policy up until now, and would like to know what options are available to you in this current environment? Would you also like to be able to speak with someone who is knowledgeable, trustworthy & up to date on the current changes and updates in the industry?
We would be honored to walk you through your options and provide you with all the information you need to make an informed decision as to what plan is right for you. We look forward to speaking with you soon. Contact Us today to speak with a Licensed Specialist.