Would they be able to survive it and pay out? Are they required to maintain a certain amount of reserves? I'd be pissed if I died and my family got screwed.

i dont know it off the top of my head but most insurance companies have clauses for this sorta stuff

hedge_zer0 said:

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i dont know it off the top of my head but most insurance companies have clauses for this sorta stuff

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No they don't. They have clauses for things like suicide or being killed in the act of committing a felony (suicide by cop, shot while robbing a bank) but most don't/can't put clauses into a policy for dying from an unknown flu strain at some unknown point in the future. And even the suicide clause is required to go away after a few years. If a policy holder commits suicide 10 years after purchasing the policy the courts will legally require the company to pay the claim assuming everything else is in good standing.



The answer to the OP is yes, most life insurance companies will be fine. Almost all insurance is regulated by the states and part of being able to sell life insurance in a specific state is meeting their reserve requirements. Those reserve requirements are similar to bank reserves in that they have to be in extremely safe and liquid positions. The big companies also stress test their financials/reserves periodically for situations just like this one. So unless your policy is with a company that started 5 years ago, is highly leveraged, barely meets the reserve requirements, and is particularly hard hit by claims in a short amount of time, your family should be fine.

i though there was a natural disaster clause

hedge_zer0 said:

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i though there was a natural disaster clause

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There's an "act of God" clause in some policies but that typically applies to property coverage, not life insurance. And the insurance company would have a hard time in a court room trying to convince a jury that this would qualify under that provision. That's usually limited to things like earthquakes, tsunamis, asteroids, etc. Not a virus.

Thanks! One policy with farmers and another with northwestern mutual. I think they're both pretty solid?

This is the inverse of the thinking regarding funeral homes (from the thread on that topic).

Even if we get into the worse end of recent models regarding US deaths (200k)... there will be a massive reduction in the #1 cause of death in this country - Auto Accidents. Add to that - many life insurance companies also do auto insurance... there are millions of people still paying their premiums, but barely driving right now.

I also wouldn't be surprised if flu season in the fall is extremely light due to lack of worldwide travel right now (that is, we should see a lighter flu season in the southern hemisphere right now).

TLDR: I believe almost regardless of how Covid shakes out, we're going to see a decline in overall deaths in the US due to how much safer we're living by trying to stay at home as much as possible.

CS78 said:

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Thanks! One policy with farmers and another with northwestern mutual. I think they're both pretty solid?

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You'll be fine with both of those.


Insurance companies typically weather these things nicely. They're conservatively invested due to what they do, and if they're well capitalized, they typically have cash sitting around or coming in on a regular basis via premiums and they're looking for something to do with it. They rub their hands together during situations like these because there will be five star investments for sale at a discount due to other institutions being financially stretched and stressed. The big boys gobble up opportunities during 2001/2008/2020 type years.

Think a lot of folks have posted regarding average daily deaths could be even or lower these months, potentially for the year.

And exclusions for life insurance are generally pretty limited. Suicide is often notes, as above, as an exclusion. However, this is typically limited to a period of time following the placement of the policy or change in policy.

For instance, my dad had a policy through work. They tried to deny as there was a policy change in prior year. Policy change was due to an increase in salary before he retired, and not initiated by him. Policy paid. My policy has an exclusion that I believe expired 2 years after policy was put in place. No worries TexAgs, I don't plan to test it.

On another note, I got a call from financial adviser for retirement plan we have with an annuity but would rather have a term life policy in it instead. I did not pass underwriting a year ago due to health issues. He said they had greatly relaxed their restrictions and to reapply. I would assume if I take a "COVID-19 exclusion" to the policy they may underwrite it. Have not received the details yet. Will report back if I do understand why they are reconsidering.