The coronavirus is making more people think about the importance of life insurance to protect their families if anything happens to them – even if they're healthy now. "The demand for life insurance is up," says Byron Udell, president of AccuQuote, an independent life insurance brokerage firm. His company is taking about 35% to 50% more applications each day and is hiring more agents.
But social distancing rules have made it difficult to follow the regular procedure for getting a policy, and companies are being more careful about insuring some people who face greater medical risks. The process, prices and rules are changing rapidly as insurers learn more about the pandemic. Here are answers to some key questions about buying life insurance now.
Market gyrations may seem wild, but the general stock market has solid fundamentals. These seven stocks will keep an even keel as the market gyrates.
7 low-volatility stocks
for jittery times
Hover for preview
Instead of slashing holdings, experts advise more surgical moves, including checking P/Es and tilting toward dividends.
Five ways to safeguard a portfolio during a downturn
Hover for preview
The Federal Reserve doesn't need to lower interest rates, but it probably will anyway. Coronavirus has introduced a new risk into a global economy.
A Fed rate cut right now is the wrong medicine
Hover for preview
9 of the best gold ETFs to hedge volatility
The precious metal is attractive when uncertainty abounds in the market.
Read Story
A rally for alternative energy stocks
Alternative-energy stocks skyrocket amid renewed optimism about the industry. Analysts point to backlashes against power outages and climate-change as some of the reasons behind their newfound popularity.
Read Story
16 stocks Warren Buffett is buying and selling
Berkshire Hathaway's latest scorecard is out. Here are all the stakes that Warren Buffett's investment vehicle added to, or trimmed, during the final quarter of 2019.
Read Story
To replace an image, select the png or jpeg on the canvas or in the layers panel and click the "Replace image" button, which is next to the image thumbnail in the design panel. Any applied animation to the original image will carry over to the new one.
Tip: Try to make the new image a similar size and dimension to the image being replaced.
Yield and stability are key for older investors to consider when managing their portfolios.
8 stocks to buy if you're over 50
Read Story
7 dividend stocks for a bear market
One way to deal with stock market uncertainty is to move into safer dividend stocks. Prepare for the next bear market with these super safe dividend stocks.
Read Story
12 stocks for a market
in turmoil
If you're searching for havens when Wall Street tumbles, stronger companies can help you play better defense. These dozen names may be what you're looking for.
Read Story
To replace an image, select the png or jpeg on the canvas or in the layers panel and click the "Replace image" button, which is next to the image thumbnail in the design panel. Any applied animation to the original image will carry over to the new one.
Tip: Try to make the new image a similar size and dimension to the image being replaced.
Hackers are ramping up attacks on retirement accounts
The financial services industry is a top target for scammers. Here's how to keep yourself safe.
Read More
10 best retirement plans
in 2020
Use this interactive guide to help you find the best plan for achieving financial security in your golden years.
Read More
How to decide where
to retire
Consider costs, lifestyle preferences and the quality of life when selecting a place to retire.
Read More
Tip: How to save time when creating a tab module from scratch.
Create one tab that has the images, text format, animations, and interactions you want the other tabs in the module to have. Copy and paste the tab and change the names of the pasted tab folders in the layers panel. You can then change the text and images in each tab. This is more efficient than making each tab from scratch.
Turn flat objects into multidimensional, dynamic content by adding a drop shadow.
To apply a drop shadow, select the shape or image and add a shadow in the design panel. Experiment with the shadow color, blurriness, and position in relation to the asset.
Round the corners on images and rectangles.
To do this, select an image or rectangle and change the value under "Corner Radius" in the Design tab in the Inspector Panel.
To replace an image, select the png or jpeg on the canvas or in the layers panel and click the "Replace image" button, which is next to the image thumbnail in the design panel. Any applied animation to the original image will carry over to the new one.
Tip: Try to make the new image a similar size and dimension to the image being replaced.
Create digestible content and save screen real-estate by condensing lengthy content into categories that can be viewed on separate tabs.
Template - Horizontal Tab Module
1280px x 720px
The co-managers of Tocqueville Asset Management's Enhanced Income Strategy offering count JPMorgan preferred stock among their holdings.
Cautious buying in
today's market
Deep interest rate cuts could help many companies, but some more than others. These seven names could benefit now that the Fed has sent borrowing costs to a low.
Read MORE
10 stocks you may want to hold onto
In a market environment that overwhelmingly encourages constant activity by investors who seemingly want to double their money every week, a discussion of stocks to buy and hold forever seems comically out of place.
Read MORE
7 stocks to get you thinking like Buffett
Warren Buffett's long-term value strategy has gotten him through many a bear market. If you want to invest like him, these seven names may be worth a look.
Read MORE
The current downturn has dividends getting cut, making quality companies more important to investors. These 15 names have raised their payouts for at least 50 years.
15 ‘dividend kings’ for today’s market
Read MORE
Dividend Stocks
Oracle of Omaha
Investing Strategies
Interest Rates
INVESTING IDEAS
Tip: How to save time when creating a tab module from scratch.
Create one tab that has the images, text format, animations, and interactions you want the other tabs in the module to have. Copy and paste the tab and change the names of the pasted tab folders in the layers panel. You can then change the text and images in each tab. This is more efficient than making each tab from scratch.
Turn flat objects into multidimensional, dynamic content by adding a drop shadow.
To apply a drop shadow, select the shape or image and add a shadow in the design panel. Experiment with the shadow color, blurriness, and position in relation to the asset.
Round the corners on images and rectangles.
To do this, select an image or rectangle and change the value under "Corner Radius" in the Design tab in the Inspector Panel.
To replace an image, select the png or jpeg on the canvas or in the layers panel and click the "Replace image" button, which is next to the image thumbnail in the design panel. Any applied animation to the original image will carry over to the new one.
Tip: Try to make the new image a similar size and dimension to the image being replaced.
Create digestible content and save screen real-estate by condensing lengthy content into categories that can be viewed on separate tabs.
Template - Horizontal Tab Module
1280px x 720px
Yes. Most insurers haven't changed their rates for healthy people, although Udell expects a few companies to increase premiums in the next few weeks. Several insurers have already added restrictions for certain groups of people because of the coronavirus. It can be more difficult for people who have other health issues to get coverage now, and one insurer stopped issuing policies to people over age 70, even if they are in good health, says Udell. A few insurers have stopped selling 30-year term policies, but that change is more because of low interest rates than because of the coronavirus, he says.
If you've been out of the country, most insurers are requiring you to wait at least 30 days before applying for coverage, no matter where you've been. If you plan to travel out of the country, you usually have to wait at least 30 days after you return to apply for coverage.
Once the current crisis subsides, workers will need to focus on rebuilding their savings, including those who reduced their savings rate to preserve cash. That means re-enrolling in a retirement plan and committing to gradual but steady increases in contributions at some point in the future.
For those wondering how best to play catch-up, I suggest you default to the following: Go back to your precrisis saving rate next year, then increase that rate 2 percentage points annually until you reach 15%, the new cap under a new law known as the Secure Act.
You can set up a basic version of this nudge on your own, putting a reminder in your calendar to increase your savings rate next year, or on your next birthday. Research shows that people are particularly likely to take steps to achieve a goal during certain temporal landmarks that represent new beginnings, whether it’s a birthday or new year. This is known as the fresh start effect.
Of course, it’s a lot better if employers and plan providers create autopilots for these interventions, making it easy for people to commit to save more with a single click. Most already offer a version of the “savings escalator,” but every employer should.
Companies also could encourage employees to save at a higher rate in the future by implementing a “stretched match.” For example, instead of offering 50 cents on the dollar up to 6%, they could offer 25 cents up to 15%. In the short-term, this will save companies money. In the long run, it will encourage workers to save more and demonstrate a commitment of the company to their retirement success.
Unfortunately, millions of workers won’t be able to keep saving with their current employer because they have lost jobs due to Covid-19. These Americans are facing perhaps the hardest decision of all: What should they do with their old retirement accounts?
Generally speaking, when people change jobs, about a third of workers keep the account with their old employer, a third roll it over to an IRA, and a third cash it out.
My rule of thumb for the newly unemployed is to keep your retirement account where it is. You often benefit from lower investment-management fees and it is the path of least resistance. However, if you want to mentally “close the chapter” with your old employer, and you don’t need the funds right away, it’s definitely better to roll it over than cash out.
Be aware, however, that our current system almost always makes it easier to cash out than roll it over. This is backward. Given the need for savings, companies and plan providers need to make rolling over a retirement account as easy as cashing out.
Once the current crisis subsides, workers will need to focus on rebuilding their savings, including those who reduced their savings rate to preserve cash. That means re-enrolling in a retirement plan and committing to gradual but steady increases in contributions at some point in the future.
For those wondering how best to play catch-up, I suggest you default to the following: Go back to your precrisis saving rate next year, then increase that rate 2 percentage points annually until you reach 15%, the new cap under a new law known as the Secure Act.
You can set up a basic version of this nudge on your own, putting a reminder in your calendar to increase your savings rate next year, or on your next birthday. Research shows that people are particularly likely to take steps to achieve a goal during certain temporal landmarks that represent new beginnings, whether it’s a birthday or new year. This is known as the fresh start effect.
Of course, it’s a lot better if employers and plan providers create autopilots for these interventions, making it easy for people to commit to save more with a single click. Most already offer a version of the “savings escalator,” but every employer should.
Companies also could encourage employees to save at a higher rate in the future by implementing a “stretched match.” For example, instead of offering 50 cents on the dollar up to 6%, they could offer 25 cents up to 15%. In the short-term, this will save companies money. In the long run, it will encourage workers to save more and demonstrate a commitment of the company to their retirement success.
Unfortunately, millions of workers won’t be able to keep saving with their current employer because they have lost jobs due to Covid-19. These Americans are facing perhaps the hardest decision of all: What should they do with their old retirement accounts?
Generally speaking, when people change jobs, about a third of workers keep the account with their old employer, a third roll it over to an IRA, and a third cash it out.
My rule of thumb for the newly unemployed is to keep your retirement account where it is. You often benefit from lower investment-management fees and it is the path of least resistance. However, if you want to mentally “close the chapter” with your old employer, and you don’t need the funds right away, it’s definitely better to roll it over than cash out.
Be aware, however, that our current system almost always makes it easier to cash out than roll it over. This is backward. Given the need for savings, companies and plan providers need to make rolling over a retirement account as easy as cashing out.
Can healthy people get life insurance now?
Rebuilding your savings
My last rule of thumb is aimed at retirees who are debating whether to skip their required minimum distribution, or RMD, for 2020.
If you don’t need the money—and you may not, since many Americans have cut back on spending amid the current crisis—don’t take it out this year. I’m not recommending this because of recent market performance or trying to time the market. Rather, it’s because skipping your RMD this year means you will have more later, and thus reduce the very real risk of outliving your assets.
If you need the money, I recommend taking it out little by little, perhaps every month or quarter, to avoid the potential regret of selling assets near the bottom of a correction.
One day, the Covid-19 pandemic will be a distant memory. However, the financial decisions we make during this crisis will have long-term consequences, potentially reducing our financial security well into the future. Unless we give people clear and simple recommendations, and make it easy for them to follow, our well-intentioned reforms might backfire.
Take or skip?
Rebuilding your savings
My last rule of thumb is aimed at retirees who are debating whether to skip their required minimum distribution, or RMD, for 2020.
If you don’t need the money—and you may not, since many Americans have cut back on spending amid the current crisis—don’t take it out this year. I’m not recommending this because of recent market performance or trying to time the market. Rather, it’s because skipping your RMD this year means you will have more later, and thus reduce the very real risk of outliving your assets.
If you need the money, I recommend taking it out little by little, perhaps every month or quarter, to avoid the potential regret of selling assets near the bottom of a correction.
One day, the Covid-19 pandemic will be a distant memory. However, the financial decisions we make during this crisis will have long-term consequences, potentially reducing our financial security well into the future. Unless we give people clear and simple recommendations, and make it easy for them to follow, our well-intentioned reforms might backfire.
Take or skip?
The first difficult decision faced by workers who are forced to pull money from retirement savings is whether to take a hardship withdrawal or loan. The withdrawal might seem to offer the best of both worlds under the new law. It doesn’t have to be repaid—but if the worker can repay it within three years, he or she will get a refund on taxes paid. A loan, on the other hand, must be repaid on a fixed schedule.
The flexibility associated with the withdrawal, however, is likely an illusion. That’s because retirement plans don’t have automated repayment systems for withdrawals like they do for loans. Instead, workers will have to remember to send checks or payments on their own, and behavioral research tells us most are unlikely to do so.
What’s more, claiming the tax benefit for repaying Covid-19 withdrawals is likely to require a professional accountant, as workers will be seeking a credit for taxes they’ve already paid.
Therefore, if you are serious about putting back whatever amount you pull out, go with a loan because it makes repayment easy. (You also have more years to pay it back.) If you don’t think you’ll repay, or if you are likely to lose your job, use the Covid-19 withdrawal.
That said, employers should still set up auto-payment systems to help people pay back their withdrawals.
After deciding between a loan or a withdrawal, the next question is how much to pull out. To make it easy, I propose this general guideline: Take half of what you think you might need.
To understand why “take half” is a valuable nudge, it’s important to understand how most people settle on financial numbers, whether it’s an initial savings rate or a loan amount. Research that I conducted with Nobel laureate Richard Thaler suggests that many people rely on mental shortcuts when making difficult financial decisions instead of considering their actual needs. For instance, we found that people were nearly 20 times as likely to select 10% as a savings rate rather than 9% or 11%. Why is that? Because 10% is an easy round number to consider. This tendency could lead some workers to take out the maximum permitted under the Cares Act simply because it is easy.
By following my “take half” rule, you will preserve more of your nest egg and maintain the option of taking out the second half at a later date. And considering that most Americans have significantly cut back their spending during the shutdown, you might not need the money.
The only potential problem with this approach is that some employers don’t let plan participants take out multiple loans. Companies should consider lifting this restriction to discourage workers from taking out larger loans, just in case they need the money.
What about those who decide against a loan or withdrawal but want to cut back on their savings rate to preserve cash? Try to save at least save the minimum needed to get the maximum employer match. In other words, don’t leave money on the table.
Dipping in
The first difficult decision faced by workers who are forced to pull money from retirement savings is whether to take a hardship withdrawal or loan. The withdrawal might seem to offer the best of both worlds under the new law. It doesn’t have to be repaid—but if the worker can repay it within three years, he or she will get a refund on taxes paid. A loan, on the other hand, must be repaid on a fixed schedule.
The flexibility associated with the withdrawal, however, is likely an illusion. That’s because retirement plans don’t have automated repayment systems for withdrawals like they do for loans. Instead, workers will have to remember to send checks or payments on their own, and behavioral research tells us most are unlikely to do so.
What’s more, claiming the tax benefit for repaying Covid-19 withdrawals is likely to require a professional accountant, as workers will be seeking a credit for taxes they’ve already paid.
Therefore, if you are serious about putting back whatever amount you pull out, go with a loan because it makes repayment easy. (You also have more years to pay it back.) If you don’t think you’ll repay, or if you are likely to lose your job, use the Covid-19 withdrawal.
That said, employers should still set up auto-payment systems to help people pay back their withdrawals.
After deciding between a loan or a withdrawal, the next question is how much to pull out. To make it easy, I propose this general guideline: Take half of what you think you might need.
To understand why “take half” is a valuable nudge, it’s important to understand how most people settle on financial numbers, whether it’s an initial savings rate or a loan amount. Research that I conducted with Nobel laureate Richard Thaler suggests that many people rely on mental shortcuts when making difficult financial decisions instead of considering their actual needs. For instance, we found that people were nearly 20 times as likely to select 10% as a savings rate rather than 9% or 11%. Why is that? Because 10% is an easy round number to consider. This tendency could lead some workers to take out the maximum permitted under the Cares Act simply because it is easy.
By following my “take half” rule, you will preserve more of your nest egg and maintain the option of taking out the second half at a later date. And considering that most Americans have significantly cut back their spending during the shutdown, you might not need the money.
The only potential problem with this approach is that some employers don’t let plan participants take out multiple loans. Companies should consider lifting this restriction to discourage workers from taking out larger loans, just in case they need the money.
What about those who decide against a loan or withdrawal but want to cut back on their savings rate to preserve cash? Try to save at least save the minimum needed to get the maximum employer match. In other words, don’t leave money on the table.
Dipping in
Do you have to pay more for a policy that doesn't require a medical exam?
Some insurers require people to wait for at least 30 or 90 days before applying for coverage if they've been exposed to anyone with COVID-19. (GETTY IMAGES)
Not if they can avoid it. In normal times, most life insurance companies require a paramedical exam, where someone comes to the applicant's home to take blood and other tests and ask about their medical history. It's difficult to have in-person visits during the coronavirus pandemic, so more insurers are starting to offer policies without a medical exam. You'll usually need to answer extra questions about your health history on the application, and the insurers also use other methods to assess your risk – such as records of your prescription medications, information from previous life insurance applications from the Medical Information Bureau, records from recent doctors' visits (electronic medical records, when possible) and your driving records. Some companies use credit scores, and others use black box-type "risk scores" that are put together by the big data companies like TransUnion or LexisNexis, says Udell.
Some companies aren't eliminating paramedical exams entirely, but are bypassing them whenever possible. "Under certain circumstances, depending on their age and how much insurance they want, we'll run clients through a predictive model, and they may not need a paramedic exam or fluids tested to be issued a policy," says Quentin Doll, vice president of life insurance products for Northwestern Mutual. "If you can go through the accelerated process, we can issue a policy within a day or two. That's our goal."
Are insurers still requiring a paramedical examiner to come to your home when you apply for coverage?
Not necessarily. In the past, the premiums were much higher for policies that didn't require a medical exam. But as insurers use other resources to assess risk, the prices have become much more competitive. In fact, the companies that don't require medical exams currently have the lowest rates for some ages and policy amounts, says Udell. The no-exam companies generally have coverage limits ranging from $100,000 to $1 million, with the lower limits for older applicants. Udell works with about six companies that aren't requiring an exam now, and about 10 more don't require an exam if you meet certain medical requirements on your application. The no-exam policies can be issued within a few days.
For example, a 40-year-old man who is in excellent health can get a $500,000, 20-year term insurance policy for $309 per year from a company that doesn't do exams, which is better than the rate for the companies Udell works with that do require medical exams. For a 50-year-old man, the least expensive company Udell works with is charging $858 per year for a 20-year $500,000 policy, but it requires a medical exam. The lowest-cost company that doesn't require a medical exam is charging $940 per year. (Premiums are lower for women.)
Not right away, but the rules vary a lot by company and are constantly evolving.
People who have had symptoms or tested positive for COVID-19 have to be symptom-free for a month before Northwestern Mutual will start underwriting their policy, says Doll. "Once they've fully recovered, and as long as there are no continuing underlying conditions, there's nothing that would prevent them from getting coverage."
Some insurers require people to wait for at least 30 or 90 days before applying for coverage if they've been exposed to anyone with COVID-19, says Udell. Exposure can be difficult to prove, but that would make it hard to get coverage if anyone who lives with you has had a positive COVID-19 test.
Can someone with coronavirus symptoms or who has tested positive for COVID-19 get life insurance?
Probably, but you may have a few options. If you're just furloughed, your employer may keep your coverage for a while. "It's all over the board," says Robert McGee, senior director of absence, disability management and life insurance for Willis Towers Watson. "Some carriers say they'll allow an employer to continue coverage for employees on furlough or temporary layoff for two to 12 months."
If your employer's coverage ends after you are laid off, you may be able to convert the term policy into a whole life policy that you can keep after you leave your job. "But the increase in premium can be astronomical," says McGee. "That conversion option usually is not the best option for someone who is laid off." Some policies offer a "portability" option that lets you switch to your own term insurance policy, which costs less than the conversion policy but may still be more expensive than buying your own coverage if you're healthy, he says.
If I have life insurance through my employer and lose my job, will I lose my life insurance coverage too?
Contact your agent and insurer and find out about your options. Many insurers are offering more payment flexibility over the next few months. New York Life, for example, is temporarily pausing cancellations for non-payment of premiums through June 23, 2020 (only for policies that were issued before March 24, 2020 and the first premium has been paid). All missed payments will be due once that period ends.
"Life insurance is one of the most important ways people protect their families, and we have seen a significant increase in interest since this situation emerged," says Aaron Ball, senior vice president and head of insurance solutions at New York Life. "We have been working to ensure that people who want protection for their families can get it, and no existing policyowner loses their life or long-term care insurance coverage during the next several months because of a financial hardship caused by COVID-19."
What happens if I have trouble paying my premiums because of the economic downturn?
Yes. If you already have a permanent life insurance policy, then you can borrow most of the cash value at any time without having to submit a loan application. The loan doesn't affect your credit rating, and you can usually get the money within 48 hours. "Permanent insurance provides a lot of flexibility," says Doll. "It builds accumulated cash value that can be accessed at any time and for any reason very quickly." He says that policy loans have been especially helpful for small business owners who need the extra cash to help keep their businesses running over the next few months.
You pay interest on the loan, but there's no repayment schedule. If you die before repaying the loan, the balance is subtracted from the death benefit.
If I have a permanent life insurance policy, can I use the cash value as an emergency fund?