If the coronavirus pandemic has you thinking about what would happen to your family if you died, you're not alone.
In this article, we'll talk about what's happening in the life insurance marketplace right now and give you Clark's advice for policy shopping. And that includes one thing Clark says you absolutely must do.
In the past, buying life insurance might have meant calling your agent and letting her know you were interested in a policy. But technology and other developments — particularly COVID-19, at the moment — have shaken things up.
“There are strange distortions going on in the life insurance market right now,” Clark says.
Clark cites a May 10, 2020, Wall Street Journal article: It says some insurers have stopped offering life insurance for people over 70 because of the high mortality rates for older Americans with coronavirus. But, as Clark points out, that's a small number of insurers.
He says there’s currently a bigger factor at play.
“Insurers live off of the money you pay in premiums being invested,” Clark says. “Right now, insurers can’t earn the kind of returns on the money they’re investing that they have historically.”
So while some insurers are getting pickier about who they will cover, others are simply raising their rates.
Insurance is a very large industry with a huge number of players. There are thousands of companies that write life insurance policies, according to Clark. For that reason, you must do your research.
If insurers are raising rates because they're worried about their earnings on premiums, it could mean one carrier's price is more than 20% more expensive than another for the same coverage.
For that reason, it's really important to use one of the shopping services (a list is below) to compare quotes. And the type of insurance you shop for is of utmost importance: Clark says level term insurance is the only kind of life insurance most people should ever buy.
“Level term is the right kind of life insurance to buy for probably 95% of people because there’s no investment in it, no savings accounts in it,” he says. “It pays your survivors in the event of your death. It’s really simple, really cheap, and the premiums stay the same for the period you buy it for — 10 to 30 years.”
Luckily there are several sites that let you compare quotes for level term life insurance from multiple companies. They include:
I decided to give one of these services a try to see if the quotes I got reflected Clark’s warning about the wide variation in prices right now.
Based on a review by Theo of Team Clark, I decided to check quotes through Policygenius, since I knew I'd get offers instantly.
After inputting the required information about myself (a non-smoker in his mid-40s with no serious medical conditions), here are the quotes I got for level term policies with $1,000,000 of coverage for 20 years on May 18, 2020:
As you can see from the chart, the majority of the quotes I got were in the $100 to $110 a month range. However, there was a substantial difference between the lowest and highest quote. In fact, the most expensive quote I got was almost 22% higher than the least expensive option.
To put it even more starkly: If I paid these premiums over the full 20-year term, I would spend $5,212.80 more with Mutual of Omaha than with Transamerica.
The bottom line: While you should comparison shop for almost anything you buy, it’s particularly important right now with life insurance.
“There’s never been a time where it was easier to shop from company to company, and it’s what you need to be doing because of the unusual distortions in the marketplace,” Clark says.
I was able to get my quotes in less than five minutes — not a bad use of my time to save thousands of dollars.