Life insurance payouts hit record 100BILLION last year – up by a quarter from 2019

US life insurers paid out a record $100 billion in death benefits in 2021, marking a jump of more than 27 per cent from 2019. 

The spike in death benefit payouts is suspected to be linked to pandemic-era deaths. Over one million people have died from Covid, though the true death toll of the pandemic is projected to be much higher due to non-Covid causes such as drug overdoses and delaying crucial medical care.

Payouts grew by 11 per cent in 2021 to $100.19 billion, according to the American Council of Life Insurers. The latest spike follows a similar year-over-year increase of 15 per cent in 2020. 

That rate has increased yearly since 2019, when insurers paid out roughly $78 billion.

Reasons for the deaths were not disclosed by the ACLI, which posits that the increase is linked to the pandemic. 

Life insurance policies are meant to protect spouses and children from potentially devastating economic harm brought on by the unexpected death of a family member. 

Myrna Guerrero, a national sales director for major life insurance company Primerica Inc. said: ‘Obviously, we won’t take the pain away of losing somebody, but financially they will be OK.’

Most Americans are given access to a life insurance policy as part of their employee benefits in their workplaces, though many buy individual plans not affiliated with their employer. An estimated 52 per cent of Americans own a life insurance policy. 

Andrew Melnyk, ACLI Vice President, Research & Chief Economist said: ‘For the second year in a row, life insurance benefit payments increased by double-digit percentages. And for the second year in a row life insurance companies stepped up to the challenge while also paying record-high annuity benefits, which typically go to retirees.

 ‘It is a testament to life insurers’ ability to prepare for any eventuality and deliver on their promises to consumers at all times.’

The year-over-year increases reported since the start of the pandemic rival those payouts distributed during the 1918 flu pandemic when payments surged 41 per cent. 

Life insurers are also seeing a jump in claims that they think are tied to delays in seeking medical care as a result of lockdowns in 2020 and general concern about being exposed to the virus.

Screenings and diagnosis rates for severe health conditions such as cancers and heart disease plummetted in the first year of the pandemic. 

Clinics and hospitals have begun restoring their screening services and a spike in deaths attributable to non-Covid health conditions can be expected. 

While mitigation measures such as mandatory masking and widespread lockdowns have largely dissipated, the effects of those measures on emotional as well as physical health will continue to be felt for years to come. 

The spike in payouts in 2020 was not unexpected. The havoc wreaked by Covid worldwide prompted millions of anxious Americans to purchase policies.

Fatalities skewed older until the delta variant arose in the summer of 2021. The new more infectious delta strain in 2021 posed a particularly high threat to children, who were not eligible for a vaccine at the time and were therefore more susceptible to severe illness. 

The delta variant boosted payouts under employer benefits plans in 2021, though most of the massive $100 billion total came from individually owned policies.