I’ve been quiet about an important topic for fear of being tasteless in our current situation. But I’ve come to the conclusion that this is no time for me to hold back as it could be the difference between some semblance of normalcy and destitution for your family. What I’m referring to is Life Insurance.
Perhaps for the first time in our lifetimes, we as a people, are extremely concerned about the health and protection of our families. And rightfully so. As a nation we have lost more people to COVID-19 in the past two months than we lost in the entirety of the Vietnam war. And it’s likely we are just in the beginning of this.
You might know that you’re in need of additional life insurance, but have been putting it off. That’s not unusual. It’s uncomfortable to think about this. But because of the increased risk, you’re thinking about your mortality more seriously now, and understand now is not the time to procrastinate.
Well, you’re right. Now is not the time to procrastinate. Aside from the increased risk brought on by this pandemic, there are other reasons you might want to consider applying for life insurance now versus waiting.
- We are now in a virtually interest-free environment and in my opinion not likely to see rates increase any time soon. These persistently low interest rates are putting pressure on the insurance companies and will cause them to raise prices on their new issues to make up for this. There is no telling when this will happen, but I believe that it is going to happen.
- Our country’s deficit was at an all-time high before this crisis, and with the expensive bailouts, we are likely to see a tax increase to refill the coffers. Perhaps that means increased income tax rates, or increased estate tax rates, or possibly even both.
- So even though your wealth might not be subject to estate taxes using current law, that certainly doesn’t mean that won’t change. And who knows, the exclusion might drop back to a modest $1,000,000 like it has been in the recent past.
- Similar to estate taxes, your heir’s income tax bracket might be low today but I wouldn’t count on it staying that way for long. This is a great way to pass on money to heirs in a tax-free manner.
- Insurance companies can now help you secure coverage in an easy, all digital, non-invasive way, which complies with social distancing orders. In response to the pandemic a growing industry trend is to have applications submitted electronically. And as carriers look to continue issuing policies amid the virus they are reviewing each case to see if they are eligible to be underwritten without any paramedical exam or lab requirements. Even if you require an exam and labs know that a nurse can come to you in full PPE, so you can feel safe while undergoing your visit. Lastly, once approved, the policy will be emailed to you for e-signatures and subsequently sent to you electronically so no face-to-face contact need be made.
- Lastly, if you’re willing to accept some market risk, you could start a variable life policy, where a portion of your premium is invested in the market. With the market being at a low, this is an opportunity to buy-in! There are even policies that offer a no-lapse guarantee so even if the market causes your cash value to decline you will still be covered. The flip side of that is, if the market grows, you could end up with a large, tax-deferred cash value that can be accessed in the future!
Unfortunately some people are concerned, or even skeptical, that the insurance carrier will not pay out if death is due to this virus, but that’s wrong. Let me assure you, life insurance covers Coronavirus. You might fear that the two-year contestability clause* may ultimately void your benefit, but that also is not the case. That clause is there for fraud prevention, so as long as you are healthy and honest at the time of application this will not be an issue.
So if you need more life insurance, now is your time to get it. There should be no hesitancy or question about it, just do it. As I mentioned before, it could mean the difference between a level of normalcy for your family or destitution.
*The 2 Year Contestability Clause is the two year period following a life insurance application where insurance companies can investigate and deny claims. Most life insurers include this clause in their policies which states they are unable to contest claims except during this period. Some states allow insurance companies to include a provision, stating that a one- or two-year contestability period must be completed within the lifetime of the insured. In this scenario, a life insurance company can refuse to pay benefits if a policyholder was so unwell when they applied for coverage that they died before the contestability period was over. Some states also allow the insurance company to void a policy if deliberate fraud is proven. Source: “Defining an Incontestability Clause”. www.Investopedia.com. May 6, 2020.
Carrie Waters Schmidt is a registered representative of Lincoln Financial Advisors Corp. Securities and investment advisory services offered through Lincoln Financial Advisors Corp., a broker/dealer (member SIPC) and registered investment advisor. Insurance offered through Lincoln affiliates and other fine companies. Equanimity Wealth Planning and Investing is not an affiliate of Lincoln Financial Advisors. CRN-3075307-050620