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Americans flocked to buy life insurance, prepare wills and trusts last year

"People were probably feeling invincible, but Covid made people realize that we're all mortal," said the president of a nonprofit raising awareness about life insurance.

More Americans turned their attention to life insurance, wills and trusts last year as the coronavirus pandemic made the reality of death unavoidable.

The number of life insurance applications from people under age 44 increased by more than 7 percent in 2020, according to the MIB Group, a data sharing service for insurance companies, which tracks life insurance applications.

Life insurance applications for the age group had been mostly down over the last several years, so "for that young age group to be up that much is very impressive," said Andrea Caruso, MIB's chief operating officer. "That's a pretty significant climb."

While several factors contributed to the spike, experts pointed to the pandemic and the insurance awareness it brought on.

"People are looking at mortality like they've never looked at it before, especially that younger age group," said Faisa Stafford, president of the nonprofit Life Happens, which promotes awareness about life insurance. "People were probably feeling invincible, but Covid made people realize that we're all mortal."

More than 22 million jobs disappeared during the early stages of the pandemic, and only 12 million were recovered, forcing many workers to leave behind their employer-paid life insurance through their employee health benefits packages.

About 54 percent of Americans had life insurance earlier this year, most of them through their employers, experts said.

"If you leave your job, that life insurance goes away. People who were losing their jobs or being furloughed were losing their insurance coverage and looking for ways to replace it," Stafford said.

The exact number of applicants filing for life insurance isn't known, as some have applied more than once and others have been denied.

Experts in the estate planning industry estimate that the number of people drafting wills and trusts is also on the rise because of the pandemic, which has "raised awareness and put the fear of God in people," said Evelyn Zohlen, national chair of the Financial Planning Association.

A recent survey found that 32 percent of people ages 18 to 34 drafted wills because of Covid-19, according to CNBC. Twenty-one percent of that group drew up the paperwork because they knew someone who had contracted the virus.

William Kirchick, the incoming president of the National Association of Estate Planners & Councils, said the pandemic and the presidential election were factors.

Like the terrorist attacks of Sept. 11, 2001, the pandemic "was an event that made people face their mortality," Kirchick said. "It's making people think about getting their affairs in order."

Experts acknowledged that preparing for death can be cumbersome. Kirchick said estate planning, which includes wills and trusts, can involve estate planning lawyers, accountants, trust officers who manage accounts for clients, insurance and financial advisers and philanthropic officers in charge of leaving money to charities. While the work can be done by a lawyer with estate planning experience, it's not necessary in many states.

As part of the life insurance process, applicants may be required to get copies of their medical records or have their vital signs checked.

Life insurance applicants typically fall into three categories: those 44 years old and younger, those ages 45 to 59 and those over 60. The percentage of applications in the youngest group skyrocketed by 18.9 percent in July and by 12.4 percent in August as the pandemic worsened, according to MIB.

Overall, insurance applications for all three groups are up by 4 percent this year.

"I would assume that the coronavirus had made people much more aware of their mortality. It made them really think about what could happen. They realized that they need to protect themselves in one way or another," Caruso said.

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Life insurance sales have dwindled for years.

Northwestern Mutual, the nation's largest seller of life insurance last year, sold 15 percent more life insurance policies from April to September compared to the same time last year, CNBC reported in October.

Similarly, policy sales at AccuQuote, an online insurance marketplace, grew by about 30 percent earlier this year as a result of the pandemic, said Byron Udell, the company's founder, president and CEO.

More education contributed to the youngest age demographic's buying life insurance, Stafford said, adding that there are many misconceptions and preconceptions about policies, such as high costs.

The average 30-year-old with no long-term health issues applying for a $250,000 policy spanning 20 years would pay about $160 a year, experts said.

"It's less than a Netflix subscription," Stafford said.

Carla Whittingham, a Primerica insurance agent in Queens, New York, agreed.

"A big part of it is leaving generational wealth for a company or loved ones. It's not just to pay for funeral costs," she said.