The Coronavirus Pandemic has created havoc on the economy and the labor market in the United States.  Nearly 15% of people are now unemployed as of May 8th, a level not seen since the great depression.  A further 23% of people are underemployed, meaning they are working more menial jobs than they are qualified for.  Not only is that bad for employees pay in the short term, but it also means that they lost their employer-provided benefits.  Life insurance is a key employer-provided benefit.  In fact, more people had coverage through the jobs with a group life insurance plan, than have individual life insurance coverage on their own.  With so many Americans laid off from their jobs and losing their benefits, the loss of life insurance could put their families at serious risk.

The risks are amplified during a pandemic because people are dying at faster rates.  As of this writing, over 74,000 people have passed away in the United States according to the CDC.  Life insurance is more important than ever when people are in bad health.

What Happens If you Don’t Have Life Insurance

Life insurance is vital for everyone.  If someone who is an income-earning person passes away, their families are left to provide for themselves independently in the absence of life insurance.  Not only is a death quite jarring emotionally, but it can also be quite expensive.  There are funeral and burial costs, and it can be disruptive to the working life of a spouse.  This can lead to further financial hardship which could easily be prevented with life insurance.  Life insurance can be used in a number of ways such as:

  • Paying off a mortgage.
  • Funding a child’s education.
  • Paying for childcare.
  • Helping to fund a retirement.
  • Providing a nest egg.

Even people without families can benefit from life insurance.  An employer-sponsored plan is often enough to help a single person’s parents pay for a funeral or to reimburse college loans that otherwise would have been paid by the working child but are now left to parents who co-signed.  Group life insurance through work often is enough to defray most of these costs.

Minorities Hit Especially Hard

The unemployment rate among minorities is even higher than the overall rate.  Black workers are unemployed at a nearly 17% rate, and Hispanic workers are nearly 19%, according to the New York Times. Since many of the families hit by unemployment are minorities and other people working below the middle class, a death will leave them especially vulnerable to financial hardship.  When minorities are left jobless at higher rates than White Americans and left without life insurance at higher rates, it perpetuates the cycle of poverty and lower standard of living among minority families.  More needs to be done to make sure that these groups maintain life insurance coverage.

How Much Coverage Does Group Life Provide?

Group life insurance is often a significant amount of coverage.  Group life insurance is often $20,000 to $50,000 of coverage, or at least equivalent to the person’s annual salary.  Group life insurance is usually paid 100% by the employer and usually gives the employee the option to purchase more life insurance for very inexpensive rates.  Group life insurance also does not require underwriting.  This means that even if someone is not insurable because of their health or past decisions such as criminal activity, they can still qualify for coverage under a group plan.  For some, it is their only affordable access to life insurance.

What Can Be Done

People are losing jobs in all industries and walks of life.  People who are laid off can try to maintain their life insurance coverage through COBRA, but they will need to pay the full cost.  The good news is that this is usually a discounted rate compared to what they will pay for an individual policy.  Anyone laid off can inquire with their HR director about what they will need to do to maintain their coverage.

People can also purchase a term life insurance policy.  Term policies that are very short in length, such as 5 to 10 years, are normally very affordable.  Most reasonably healthy people can get coverage on a policy of this duration for under $10 a month, as long as the coverage amount is under $100,000.  The policy can be canceled at any time, and it will be worth keeping for the duration of the unemployment at least.

Companies are also allowed to furlough employees for up to 12 weeks while maintaining their benefits.  More companies should consider doing this over permanent layoffs since it allows workers time to replace their benefits and look for other employment.  Many companies will also end up hiring back many people ultimately.  By paying benefits it can reduce a substantial financial burden on people who are laid off, and their families.

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