Investor Column | Reviewing your life insurance coverage during the COVID-19 crisis
While investors are wisely advised not to panic in turbulent times like these, it’s also good to stay calm when evaluating your life insurance coverage right now as well. Readers should be aware that most existing life insurance policies should pay a claim if the cause of death is due to a pandemic, such as COVID-19.
However, as the pandemic worsens, life-insurance companies may implement stricter guidelines for underwriting, and they may also increase premiums in the future, as many are suffering losses on their investments amid the sharp declines in financial markets. So, if you lack coverage or need to increase your life insurance, you should consider moving soon before your coverage options dry up.
For those of us with existing life insurance, here are some steps you can take now to get your insurance portfolio “in order” to evaluate whether or not your coverage is adequate, or if you are paying too much for the coverage you have:
Locate all existing life insurance policies. Original policies should be stored in a secure fireproof place and electronic copies should be kept in a separate folder on a home computer or cloud-based server like Dropbox.
Can’t find the policy? Then find the most recent premium notice and call the insurance company or agent to get a new copy of each policy and save it physically and electronically.
If you have group coverage through your employer, locate your benefit statement and record all relevant account information, including your HR/benefit manager’s contact information.
Create a spreadsheet (or have your financial planner do it for you) of all the policy information you locate: one policy per spreadsheet column. For each row, list out: insured, owner, death benefit, date of policy, expiration date of coverage (if applicable), insurance company, policy type, policy number, annual premiums, cash value (if any), primary beneficiary, contingent beneficiary, and the insurance carrier’s phone number.
Then, preferably with the help of a financial planner, consider whether the coverage amounts and beneficiary designations on each policy are still appropriate for your family’s needs. Have business or market declines increased your family’s risk (and need for coverage) if a breadwinner dies prematurely? Or, are there no longer dependents at home for which this coverage was needed? These are examples of a range of questions that should be asked when evaluating your insurance portfolio.
If you decide you need to apply for more life insurance, be sure to fully answer all medical questions, especially ones associated with the COVID-19 virus. Anyone experiencing symptoms, or who’s tested positive for the virus, may have their application postponed until they’ve fully recovered or have tested negative for the virus. A postponement period is typically 90 days from the date of recovery.
If you find you can get cheaper coverage than what you currently have, make sure the new policy is issued before cancelling the old life insurance policy. Also, talk to your insurance agent about all available options for disposing of a permanent policy before canceling it.
Once this spreadsheet is as complete as you can get it, save it where the policies are stored and provide a copy to key people named in your estate plan, along with telling them the location of the policies.
Encourage your parents and/or adult children to perform a similar “exercise.”
Taking these steps now to make sure you and your loved ones are adequately provided for if any crisis hits could go a long way to reducing the tendency to panic in times like these.
Hang in there!
Karin Grablin is with SRQ Wealth, One North Tuttle Avenue, Sarasota, FL 34237, 941-556-9004. www.srqwealth.com. This article is designed to provide accurate and authoritative information on the subjects covered. It is not, however, intended to provide specific legal, tax, or other professional advice. For specific professional assistance, the services of an appropriate professional should be sought. For a comprehensive review of your personal situation, always consult with a tax or legal advisor.
This story was originally published May 26, 2020 at 5:00 AM.