Not trying to be morbid, but has anyone heard, or does anyone know what the life insurance companies are planning to do about paying out policies if/when we get hit with a pandemic and a higher than normal number of people die in a short period of time? Are they going to pay out the policies or are they going to claim that a pandemic constitues some soft of extenuating circumstance and that they cannot pay out everyone’s life insurance policies when they die from influenza because it will put the companies under, or that it’s classified in the same manner as a kind of natural disaster or act of God -which isn’t always covered.
I only ask because as I continue prepping one of the things I’m trying to decide is if I should buy more life insurance to ensure that my family is not further hampered by the loss of my income if I don’t make it through a pandemic; I’m an accountant who works from home so I expect to continue working for as long as I can. It would probably make their lives easier if there was more than enough life insurance to cover all funeral expenses, pay off all debts, and have money left over to continue paying monthly bills like phone and power etc. for the duration of the pandemic so they don’t have to think about going back to work before it’s totally safe.
this is a great post- something i have not thought of my partner has life insurance but I dont - something now to think of…
You as an accountant may be better placed to judge this than me, but my feeling is that if a pandemic is bad enough that the chance of me dying of it is big enough to worry about, then the chance is also very high that the insurance companies will be simply unable to pay out all their policies, regardless of what they’d like to do. So my feeling is that there’s no point in buying extra insurance because of the possibility of a pandemic. Whether they’d have to pay out if they could would surely depend on the wording of individual policies.
For an article on how the Insurance Industry hopes to cope with Avian flu go here:
I’ve read it, and I’m not particularly reassured. They expect a severe pandemic to claim 1.9 million lives in the United States, and project paying out 133 billion dollars in life insurance claims.
The also state that business interruption insurance would not cover those businesses forced to shut down, as most policies require a tangible phsyical property loss, and they can’t imagine any pandemic scenario that would cause that.
Funny, I can.
They expect they can go to the capital markets to raise additional funds if needed.
While the health insurance companies would take a hit, they feel that it would be a minor one. Their reasoning? The health care system is already operating at near capacity, so few flu victims will actually receive medical care.
I remember reading somewhere that in the fine print of some policies a “epidemic” is not covered. Don’t know if that is true or not but I keep meaning to pull our policies out and read them over carefully. If there is a loophole we will cancel and get something else. We have three kids and I’m a SAHM. We need dh’s income to live and cover college.
Laura, in my experience, if they can find a loophole, they’ll use it.
A call to your state’s insurance commisioner might be in order.
Fla_Medic: Thanks for the link. Interesting article. I have to laugh when they say they’ll have to go to the capital markets to raise additional funds - what capital markets??? If things are to the point that they need to do that, I doubt very much that there will be capital markets to access, and if so, who’s going to give them money when all they’re doing is paying it out? Some of the comments they make here make it sound like they’re quite worried about how they’re going to come out of this in one piece - if at all.
Mathematician: IMO, if they’re going to pay out life insurance policies, it will only be for the first little while because I don’t beleive they have the resources to pay out all of the policies if we’re hit with a major pandemic. So, if I should happen to die near the beginning of the pandemic, I would think chances would be good that my policy would get paid out to my family - unless they decide it’s an “uninsurable event”. However, I doubt it would take too long for the insurance companies to realize that they can’t continue the payouts over the long haul. Hopefully those of us who are prepping and planning to self-quarantine will ultimately survive this by avoiding contact with others thereby decreasing the risk of getting sick. However, if I die early on in the pandemic, it will reduce my family’s income for an extended period of time, so money from my life insurance would greatly help them get through the following year.
So having said all that, I’m still not sure what I’ll do about buying more life insurance.
What about advanced funeral planning? This might be a better option of those who are a little older. Sure it won’t pay the bills at home but it might at least get you a decent burial if that is even possible during a pandemic.
Well, the gov. will stand to loose for insurance companies not being ethical about this. If say a father dies who is the provider and leaves behind wife and kids…the wife may not be able to provide the same salary as the father….who will have to help these families?…you got it…the government!!….I don’t get why the government keeps shooting itself in the foot.
Poppy, Advanced funeral planning is a good idea but it probably wouldn’t be able to be carried out anyway. My great uncle died in the 1918 pandemic and was buried in a simple wooden coffin in a mass grave. My dad (still living-80′s)recently told me that his aunt had his uncle’s body exhumed a few years later when she and my grandfather purchased a family plot. She insisted that the coffin be opened so that she could be sure it was her husband inside, which it was. So, even though there were mass burials, it must have been done with some system since they could identify where he was buried as well as his exact coffin (they must have been marked). My dad describes this uncle as “a big, strong, young man in his twenties”. Sad and sobering.
Two stories to calibrate the insurance industry. SOme years ago, there was a great deal of coverage about an insurance company which refused to pay the family of a passenger killed in an airplane crash (this was the airline’s insurance company). Their theory was that upon investigating the young man (in his 20′s) they determined that he was PROBABLY gay. Since he was gay, he would probably develop AIDS and die prematurely. Therefore, his life was not valued at the same rate as a “normal” passenger and they attempted to decline the claim. it went to court.
Second story is of my own experience. After leaving a job (I had first determined that the life insurance that came with the job was fully convertible to a private policy), the insurance company would gladly convert it to an individual policy for an 11X increase in the premiums. At that rate, I would have needed 2 jobs, 1 just to pay the insurance premiums.
So when you consider what these magnanimous individuals in the insurance industry will do, think on the pessimistic side.
I’m sure a pandemic will be considered an act of God…
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