It takes a pandemic to get people to buy life insurance
I’ve been writing a weekly finance column for almost a decade now and I’ve dedicated countless columns to trying to explain to people why they really should have life insurance. Especially for those with small children, big mortgage balances or other financial risks.
But the thing is, most people really don’t like thinking about their own demise and they will do everything possible to avoid setting up a policy. Whether it’s due to an inaccurate belief that the insurance is expensive, attempts to rationalize that they are healthy, and an accident won’t happen to them or just plain procrastination, many will avoid getting this important protection for their families.
After talking about the above reasons many times and people still not willing to guard their families it begs the question “What will it take?”. It looks like we’ve finally found the answer – a global pandemic.
Suddenly, life insurance has got people’s attention and the number of applications for term life policies has shot up between 50-75 per cent over the last three months. While the strong need for insurance has always been there, the willingness to explore the options and apply for policies is finally catching up.
One of the big frustrations of applying for life insurance has always been the need to do a full medical exam to prove your health which included urine and blood tests. Most major providers will now let those under age 50 apply for up to $2 million of coverage without these tests anymore.
Another struggle (excuse) for many was the lack of time to meet with an advisor and fill out applications. This roadblock has again been removed since you can now apply over the phone or via video chat, “e-sign” your application and even have your policy “e-delivered” once approved.
The third objection to setting up insurance was always around the price. While some whole life or universal life policies can be expensive, traditional term life insurance is typically quite cheap. A $500,000 term 10 policy on a non-smoking 30-year-old male is only around $23 per month. The same policy for a female would be about $17 per month.
We haven’t yet seen any increase in prices from Canadian life insurance companies. But their premium pricing is based on the cost of running the business, mortality rates and interest rates (due to the returns they receive on money set aside to pay out on future claims). With everything going on in the world today, the strain on all three factors is increasing and premiums will likely rise sometime soon.
There is no doubt that this pandemic has been tough on all of us but if a small side effect is that more young families get the insurance coverage they so critically need, then that’s a small piece of good news!