Life Insurance Demand Quantifies The Anxiety Of Death

The greater the life insurance demand, the higher the anxiety of death. Good thing everyone can get an affordable term life insurance policy through PolicyGenius. Both my wife and I got new 20-year term life insurance policies during the pandemic given we have two young children. As a result, our anxiety went way won.

One thing that made the pandemic especially hard was constantly feeling the anxiety of death. It's one thing to worry about your own health and safety. It's another thing to also have to worry about the health and safety of your little ones and elderly parents.

This winter has been especially difficult for little children due to the tridemic: flu, RSV, and COVID. My entire family has been sick off and on for two months. If I could donate my health points to my 5-year-old and 2-year-old so they could feel better, I would.

Alas, all my wife and I can do is protect them as much as possible. We feel like we're always making risk-reward health calculations such as whether to go somewhere public or send them to school. At least we are lucky enough to be able to keep them home when they aren't feeling 100%.

I got my parents to successfully visit us during Thanksgiving. However, with all the viruses going around, we've also had to throttle the time spent with them. I pray they don't get sick as well.

How COVID Affects Life Insurance Rates

I like to quantify our feelings with data. Reconciling the two is a good way to understand whether what are are feeling is logical or not.

Luckily, I stumbled across an insightful article by Kate Dore from CNBC which discusses how COVID has changed the life insurance marketplace. It highlights the change in life insurance demand during the pandemic.

The gist of the article is that life insurers won't know the full impact of COVID on mortality rates for perhaps 10 years. There are “long COVID” and unknown long-term effects of vaccines to study.

But if I were a betting man, which I am, I expect life insurance carriers to raise premiums to account for higher COVID risk. Therefore, the optimal move is to lock in an affordable life insurance policy now BEFORE more data comes to light.

Feels Good To Lock In Affordable Life Insurance

In December 2021, I was able to finally get a new 20-year term life insurance policy without a medical exam. For three years prior, I had been trying to get something reasonable due to the birth of our second child in December 2019.

My 10-year term policy was expiring in January 2023 and the renewal premium would jump from $40/month to $750/month! But I couldn't find anything affordable because I had visited an overzealous sleep center in 2017. The business was brand new and the owners encouraged me to do all sorts of tests that went on my health record.

I felt so much relief once I got my new policy through PolicyGenius. It isn't the $1 million coverage I had, but $750,000 is good enough to feel peace of mind. Further, the policy is a more reasonable $110/month and can be canceled at any time without penalty.

Just look at the annual change in retirees collecting Social Security during the pandemic. There was over a 35% drop since the beginning of 2020 likely due to an increase in elderly deaths!

social security collection during pandemic

Life Insurance Demand During The Pandemic

Everybody intuitively knows why anxiety, depression, sadness, and frustration have increased since the pandemic began. Such feelings sometimes translate into hate for other people, especially for people who seem to be doing better.

Hence, for your safety and happiness, it is important to make yourself look poorer and less successful than you really are during difficult times. Unless you're trying to build a business, try not to stand out.

Below is a great chart that shows the historical interest in life insurance demand. We can finally quantify the anxiety many of us have been feeling since 2020.

Life insurance application activity was up 3.4% in 2021 after a record-breaking 3.9% in 2020, according to the MIB Life Index’s 2021 annual report. 3.4% and 3.9% doesn't sound like huge increases, but it is for the life insurance industry.

I suspect once the 2022 data comes out, demand for life insurance will also be up again.

What's more interesting is the 15.4% and 11% increase in what life insurers paid out in 2020 and 2021 according to data from the American Council of Life Insurers.

What Are Life Insurance Companies Going To Do?

The difference between the payout percentage and the application percentage is an indication of increased deaths and lower life insurance profitability.

A double-digit yearly increase in death benefit payouts is massive. Just think if you were running a business where your costs were up 11% – 15.4% YoY, but your revenue was only up between 3.4% – 3.9% during the same period.

You hope your expenses will normalize as mortality rates revert back to the mean (people go back to living longer). However, you're not sure exactly when or if this will occur. At the same time, you also fear the long-term repercussions of COVID, which could lead to higher mortality rates (earlier deaths) and fewer premiums paid.

What does a life insurance company do in the medium-to-long run? It will likely raise premiums to make up for lower profitability. And one way to justify raising premiums is by implementing COVID-related questions in the future.

Life Expectancy At Birth, By Sex In The United States

Take a look at this CDC chart on the life expectancy at birth by sex in America. This is the first time in 21 years at least that life expectancy has declined.

Not only has life expectancy declined in America, it has declined by a lot. I would have expected maybe a 0.1-0.3-year decline in life expectancy. But not a 2-3-year decline in life expectancy!

Hopefully, life expectancy rebounds and reverts back to trend over time. But again, we don't know for sure, which is why it's best to lock in an affordable term life insurance policy before premiums go higher.

Life expectancy at birth, by sex United States 2000 - 2021

Much Less Anxiety Now

As soon as I locked in my 20-year term life insurance policy in December 2021, my anxiety about dying went away. I beat the clock, which was set to expire on January 3, 2023. My wife had already successfully doubled her coverage amount to match mine for less in 2020. The pandemic spurred us into action.

Now that I know there was an 11% – 15.4% YoY increase in death benefits paid out in 2020 and 2021, I feel even better about both of our new life insurance policies. My premium doesn't just go toward paying a death benefit, it also goes towards improving my mental health.

If you were or are still feeling anxious about death during the pandemic, know you are not alone. The data backs up what you've been feeling all along.

Good thing there's something we can do about it!

Reader Questions And Recommendations

Readers, what do you think about the life insurance application and payout data during the pandemic? Do the differences in percentages surprise you? Besides getting life insurance, how are you managing any anxiety you have around death and living the best life possible?

To search for affordable life insurance quotes, take a look at PolicyGenius. You'll get real quotes in just minutes based on the information you submit. From there, you can smartly compare and go with the carrier that best suits your needs.

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11 thoughts on “Life Insurance Demand Quantifies The Anxiety Of Death”

  1. No mortgage, no car loans, pay off all cards every month, no debt at all. Lots of investments, some of them fairly liquid, and maybe a hundred k in cash. Kids grown and have kids of their own. I finally cancelled my term life that I’d been carrying for thirty years. Just couldn’t see the need. But it still felt strange.

    So, Sam, scientists, even at Harvard and those places, are talking about being able to extend human lifespans by many decades within the next few years. If true, what does this do to the insurance business as a whole? I mean, if the new projections suddenly become 150 years for American men (and maybe a 153 for women) will people buy more life insurance, or less? What about other sorts of insurance?

    For that matter, how would we restructure our investments? And what would happen to Social Security and pensions?

    1. Sure, if life expectancy grows to 150 years, life insurance premiums should go down. Great for consumers.

      If you live until 150, I guess the government will force you to work until 120 or so. I suspect many may object, which would mean more investments to generate passive income.

    1. I would get life insurance equal to the amount of debt you have. The term duration can equal when you plan to pay off the debt.

      If you die, your heirs will have to handle your estate. It would be nice for the estate to have all its outstanding debt paid off to minimize their burden.

  2. In last two years I have been to three funerals of young people (less than 40 years old). All of them with a family including young children. Come to find out there was no financial planning done in all cases, including obtaining life insurance, and I can only imagine the burden it will put on the family going forward. Family can’t even grieve as long as they want knowing they have to figure out their finances.

    I do remember the mental relief I got when I was able to purchase both term and whole life insurance (also using it for living benefits) and knowing that my loved one will be taken care of.

    1. The mental relief is worth A LOT! I will gladly pay my $110/month just for the much reduced anxiety I feel, alone. Sadly, many young folks don’t realize the amount of stress that comes once the kids arrive and their parents get very old.

  3. I didn’t expect to have more and more people I know pass away until getting into my 60s and 70s+. Alas, in my 40s I’m saddened by how many people in my network of fellow 40 and 50 year olds have already passed away or have been diagnosed with serious illnesses. I hope I never need my life insurance during its remaining term, but I do sleep better at night knowing that I have coverage for my family.

    1. Illness is an inevitability. Hence, the strategically wise move to lock in an affordable life insurance policy before the illness occurs.

      At age 45, I am aware of so many more health issues for everybody. But we don’t know or care when we are much younger.

    2. Hi, I want to take a break from work so that I can spend more time with kids when they are still young.

      Its not easy to walk away with mostly pay check. Even I have all my insurance, sufficient investment cashflow to cover expenses, insurance to cover for worse case its will worrying for me.

      How do you live with it?

  4. Whatever skepticism there is about the media’s narrative regarding COVID’s long-term effects or vaccine safety, it’s those who stand to profit in the private sector that will interpret the data correctly and reveal the truth by how they adjust their business.

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