Last week OneAmerica CEO J Scott Davidson sounded the alarm about the stunning increase in USA death rates. He says they are up over 40% since before the pandemic and they are NOT all Covid-related. What does it all mean?
First of all, this sort of phenomenal increase will undoubtedly test the financial strength of every life insurance carrier. It’s a competitive business and that means they all try their best to offer good rates. For mutual insurers, this increase in death rates can be particularly devastating. Why? Because they not only need to remain financially stable but many pride themselves on posting substantial dividends each year. You can expect dividends to fall quite a bit if you already own a policy. In a worst case scenario, we can expect a number of insurance carriers to go belly up. But that’s not all…
Expect life insurance rates to go up, up, UP! They have to. Before the pandemic, many life insurance companies had lowered rates due to Americans living longer. That table has turned. Remember, insurance rates are based on what the company expects to pay out in death benefits over the years. With this mind-boggling increase in death rates, nobody can tell if this is a blip or a trend. Insurance companies are legally, morally, and ethically obligated to remain financially stable. In order to do so they must charge a reasonable rate to ensure they’ll be in business for the long haul.
What This Means to You
If you have life insurance, and by that I mean your own policy rather than workplace insurance, then you’ll want to keep close tabs on your insurance carrier. Search for them in the news for any announcements about their finances. Open everything they send you through the mail. There is not much you can do if your insurance company fails. Your state will cover some of your policy and even your cash value but these numbers vary by state and, like a run on a bank, if a number of insurance companies fail at the same time, those state funds might become depleted fast. If worse comes to worse, you’ll lose some or all of your policy’s value. How much will a state cover? While state levels differ, the maximum limits recommend by the NAIC is currently $300,000 in life insurance benefits and $100,000 in cash surrender or withdrawal benefits per policy. At least you’ll know.
So is this a bad time to buy life insurance? Yes and no. Mostly no. Sure there is no guarantee any insurer will be around in the future. This is always the case. That said, they are all likely to go under. In fact, I suspect only the weakest companies will fail. The rest will weather the storm. So, if you do your homework carefully, you should be all right. The bad news is, you can expect to pay more for less. Granted this means it is not the best time to buy insurance but again, nobody can tell the future. Things could get better or they could get worse. Meanwhile the massive increase in death rates means your family may need a death benefit sooner than you anticipate. Better to have something than nothing.
My soon-to-be-published book, “Life Insurance Dirty Little Secrets for Consumers Revealed!” provides, good, no-nonsense advice on how to buy life insurance as well as how to keep your policy safe from common clauses that can bleed your cash value dry. Be sure to pop your name and email in the form to your right to get your copy as soon as it hits the presses.
Andy