How Urgent Is Life Insurance for Americans? That Depends on COVID

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Among the 55% of Americans who say they have life insurance, a quarter say they purchased or increased life insurance coverage due to the COVID-19 pandemic, a NerdWallet survey finds.

Coronavirus has put a spotlight on the precarity of life. Some Americans have bought life insurance to help their loved ones in the event of their death. A new NerdWallet survey found that 25% of Americans who said they had life insurance, either through their employer or an insurance company or broker, say they bought or increased their coverage because of the COVID-19 pandemic.

NerdWallet surveyed more than 2,000 Americans online, including 1,078 who have life insurance. We asked them about their life insurance coverage and the reasons that the pandemic motivated some Americans to increase or decrease their coverage. We also looked at why some Americans felt that getting life insurance was the best move, and why others didn’t.

The key findings

  • Millions of Americans don’t own life insurance. About 2 out 5 Americans (39%) don’t have any life insurance, whether they have it through their work or from an insurance company. Another 7% don’t know if they have coverage.
  • COVID-19 encourages insurance signing-ups
  • Younger Americans are getting insurance: Millennials (aged 24-39) who have had life insurance for years are more likely to be insured than their older counterparts — 42% compared to 30% of Gen Xers and 5% of the baby boomers (ages 56 to 74).
  • Motivators are fear and proximity to illness: Americans who bought or increased their life insurance because of the pandemic were motivated by fear of getting diagnosed with COVID-19 (30%) and the possibility of knowing someone with COVID-19 (29%).
  • Dropping cases is often cited as a reason for dropping interest. Around 1 in 7 Americans (14%) who did not purchase life insurance through a broker or company considered buying life insurance because of the COVID-19 pandemic. However, they ultimately chose to not. 35 percent of those who opted against it (34%) claim that COVID-19 incidences in their region started dropping.
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Parents: Millennials receive or increase coverage because of pandemic

Some Americans were inspired by the pandemic to increase or get life insurance. 13% of all insured Americans say they bought life insurance because of the COVID-19 pandemic. Another 12% claim that they have increased their coverage as a result.

Children under 18 years old are more likely than those without children to have life insurance (66% versus 50%). 44% of parents with minor children are more likely to say that they have purchased or increased coverage because of the pandemic than 13% of parents without children. Millennials are more likely to claim that they bought or increased coverage because of the pandemic than their older counterparts (42% vs 30% for Gen Xers and 5% for baby boomers).

Ben Moore, NerdWallet’s insurance specialist, says that the best time to buy life insurance is while you are young and healthy. Premiums will rise if you wait to get older or are diagnosed with a chronic disease.

The biggest motivation for getting coverage is fear of the COVID-19 diagnosis

The biggest reason Americans purchased or increased their life insurance coverage to combat the pandemic is the fear of getting diagnosed with COVID-19 (29%) 29 percent of those who purchased or increased their coverage said they did so because a friend was suffering from COVID-19.

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Nearly 3 out 10 Americans who have increased their life insurance coverage because of COVID-19 (27%) say that it was because they didn’t feel enough life insurance from work. The amount of coverage that you need depends on your income and debts. You can use a life insurance calculator to determine how much coverage you should aim for.

A decline in COVID-19 case numbers means less interest in coverage

One in seven Americans (14%) who did not purchase life insurance through a broker or company said they were considering purchasing coverage because of the pandemic. An additional 16% are still considering buying. The No. The number of COVID-19 cases in their region began to decline (35%), which was the primary reason why they chose not to get life insurance.

25% of those who had considered purchasing life insurance but decided not to do so (25%) said it was too costly. About the same percentage decided that the coverage they already have through work was sufficient (24%).

Parents of children younger than 18 years were more likely to claim that they had considered purchasing coverage because of the pandemic (52% to 19%). Black and Latino Americans are also more likely than white Americans to say that they were considering purchasing life insurance due to the pandemic (45% and 49%, respectively, versus 23%).

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What Americans who are uninsured and underinsured can do

You need coverage regardless of the pandemic. COVID-19 has increased the urgency and interest in life insurance. However, coverage is still a good idea, no matter what. Life insurance is a great option for anyone who relies on you financially. Even if you do not have dependents who rely on your income, life coverage can help your loved ones cover end-of-life expenses like funeral costs.

“If you died today, would it be a financial burden for someone tomorrow?” Moore believes that life insurance is a smart investment.

Noting that there are fewer COVID-19 cases in your local area might provide some comfort, but the number of cases is increasing around the globe.

Figure out what type of insurance is right for you: If you ultimately decide you want coverage, you’ll have to decide between term and permanent life insurance. Term life insurance is only available for a specific time period, such as 10, 20, or 30 years. It pays your beneficiaries only if the policyholder dies within that timeframe. This means that if you don’t live for the specified time, there is no payout. It’s cheaper than permanent life insurance, however.

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Permanent life insurance, on the other hand covers you up to the end of your lives. There are many types of permanent life insurance, including universal, indexed universal, variable universal, and whole. Although permanent life insurance is more costly than term, it can build cash value over time and be used while an insured person is still living.

Moore states that term life is the best option because it covers you until your kids are old enough or your house is paid off. Permanent life is the best option if you require lifelong coverage and are able to afford higher premiums.

Find out how to get started. When choosing a life insurer, there are many factors to consider, such as cost, claims payability, and customer satisfaction. If you need help getting started, NerdWallet has rated the best life insurance companies, taking financial strength and any reported complaints about each company into account.

It can be hard to consider the end of your own life. Moore says that buying life insurance policies not only gives you peace of mind but also financial security for those in your life that matter the most.