The coronavirus pandemic is impacting every corner of American life and most sectors of the economy. For the life insurance industry, the pandemic presents a two-sided threat. In many cases the fallout is being passed onto potential life insurance buyers.
The risks for life insurance companies are twofold. On one hand, the epidemic presents heightened mortality risk for insurers, especially among older policyholders and those with existing medical conditions.
On the other hand, the financial fallout from the pandemic has driven many people to a more stable asset, which has pushed the yields for 10-year treasuries down to less than 1%. That’s problematic for life insurance companies because they traditionally invest 70% of their assets in long-term bonds and treasuries.1
With life insurers facing lower returns and greater risk, they’re changing their offerings. Penn Mutual Life Insurance has stopped selling policies to those 70 and older and those in poor health. Prudential has raised premiums and halted sales of 30-year term policies. Other insurers are limiting their sales of certain types of policies, particularly universal life policies that have guaranteed* death benefits and interest rates.1
If you have a need for life insurance or estate planning protection, what are your options? Below are a few steps to consider:
Review your estate planning documents.
If you can’t get the life insurance policy you need right now, it’s even more important that your estate planning strategy is appropriate for your needs. A will can help you direct assets to the right beneficiaries after your passing. More advanced tools, like a trust, can reduce taxes, probate costs, and other expenses so you can maximize your legacy for your loved ones. A financial professional can help you develop your legacy strategy.
Review your beneficiary-designated assets.
Life insurance isn’t the only asset that you can pass to beneficiaries. Your 401(k), IRA, annuities, and other qualified accounts all have beneficiary designations. Of course, those designations have to be correct for the assets to go to the correct person.
Now is a good time to review those designations and make sure they’re up to date. It’s common for people to forget to remove a former spouse or forget to add a new child to a beneficiary account. If you pass away, it may be too late to correct the mistake after you’re gone.
This also may be a good time to find ways to maximize these accounts. For example, if you have a traditional IRA, you may want to consider a conversion to a Roth. This strategy isn’t right for everyone, but it could potentially help you pass on those Roth assets to your beneficiaries tax-free, maximizing your legacy.
Work with a professional.
Life insurance companies may be tightening their rules and guidelines, but policies are still available. A financial professional can analyze options from a variety of carriers to find the policy that is best for your needs and your budget. They can also help you determine exactly how much coverage and what kind of policy is right for you.
Ready to implement a strategy for your legacy needs? Let’s talk about it. Contact us today at Caprock Financial Group. We can help you analyze your goals and develop a plan. Let’s connect soon and start the conversation.
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.
*Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values. 20096 – 2020/5/19
