Life insurance has become an essential part of American life, like it or not. We rely on life insurance to:
- Meet short term family needs if an adult dies (childrens’ education, mortgage, etc.) so that death doesn’t add financial chaos to emotional trauma;
- Meet major health care expenses that Medicare doesn’t cover after one turns 65, estimated by Fidelity Investments to be in excess of $200,000 on average;
- Provide emergency access to funds throughout life;
- Pass wealth to the next generation; among other uses.
The cost of life insurance is based in part on how long the insurance company has to make money on the premiums the policy owner pays before having to pay a claim. A longer period of time means lower costs to the buyer.
Unfortunately, Covid is shortening that time period. According to new estimate of life expectancy developed by researchers at Princeton University and the University of Southern California, Covid has caused the following reductions in life expectancy:
- Among all residents of the US: an average loss of 1.13 years if life expectancy, to 77.48 years of expected life. Please remember that healthy life expectancy as calculated by the World Health Organization is six to eight years shorter than this!
- Among white: a loss of 0.64 years to 77.84 years of life.
- Among blacks: a loss of 2.10 years to 72.78 years of life.
- Among Hispanics/Latinos: a loss of 3.05 years to 78.77 years of life.
That reduction is going to mean higher fees for everything that is age related, including life insurance. It also means that more people who delay starting Social Security may never receive any of the retirement income for which they paid.
What does it mean for you?