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Term Life Market Held Steady Through October: Economists

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The U.S. term life market looked stable during the first eight month of the COVID-19 pandemic, three economists report.

The number of term life products offered to U.S. consumers over 75 fell by 13.6 percentage points, when compared with the number of term life products offered to young consumers, and issuers pulled some of the cheapest term life products off the market, the economists write in a new working paper published on the National Bureau of Economic Research website.

But, for the most part, “there is no evidence that COVID-19 caused differential increases in premiums for the old relative to the young,” the economists conclude.


  • A copy of the pandemic life insurance effects paper is available here.
  • An article about COVID-19 and an economist’s retirement policy ideas is available here.

A working paper is a research paper that has not yet gone through a fully peer review process.

Timothy Harris, an assistant professor of economics at Illinois State University, and two colleagues — Charles Courtemanche and Aaron Yelowitz of the University of Kentucky  — based their analysis on a pool of about 800,000 policies, from 95 separate issuers, that are listed on Compulife, a life insurance quote service.

The economists looked at policies with terms ranging from 1 year to 30 years. They did not look at permanent life insurance products, such as universal life policies.

The economists say the prices older purchasers paid for term life policies seemed to increase just a little more than what younger purchasers paid, even though COVID-19 has been much more dangerous to older people than to younger people.

“Overall, the results imply that the premium response due to COVID-19 was minimal, with some evidence that price competition inhibited life insurance companies from adjusting their premiums in response to increased mortality risk,” the economists write.

Another reason for the modest impact of the pandemic on the term life market may be that “even a ‘high-risk’ life insurance customer who purchases a policy listed in our data is quite different in terms of mortality risk from those who are currently dying from COVID-19,” the economists write. “To date, approximately 40% of deaths nationwide are from those residing in nursing homes, individuals who almost certainly would be rejected if applying for a new term life insurance policy.”

Still another reason for the modest effect of the pandemic on the term life market is that many term life policies stay in effect for 15 years or more, the economists write.

If COVID-19 causes a big, temporary increase in claims, an insurer can assume that typical insureds with a 10-year or 15-year policy term will be able to spread the impact of the COVID-19 claim spike over the entire 10-year or 15-year policy term, the economists noted.

— Read Another Reason Pandemics Are the Retiree’s Enemyon ThinkAdvisor.

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