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Fall 2021 Insurance Outlook

by Michael Giusti

This fall, in addition to the requisite pumpkin spice everything, people will be adding a bit of COVID anxiety and insurance concerns to their order.

With the Delta variant surge still looking for a peak, and with nature breathing down our neck with hurricane and flu seasons, fall brings a distant promise of a return to normal, and all the insurance implications that come with it.

Health Insurance

The big health insurance question on the table this fall is about Delta – not the variant, but instead the airline.

Delta Airlines, along with a handful of other employers, announced earlier this year that with the vaccines now fully authorized by the Food and Drug Administration, it will begin instituting a health insurance surcharge on any employee who chooses not to get a jab.

While a surcharge is a bit less draconian than some policies instituted by some of the other airlines, which said that employees need to get vaccinated or else look for another job, the surcharge is not without controversy, or legal questions for that matter.

The logic behind the surcharge is seemingly sound. Unvaccinated employees who catch COVID could cost the insurance group an exorbitant amount to treat, so that extra monthly fee could be set aside to pay for any additional treatment expenses.

On top of that, economic theory teaches that if you want to discourage behavior, you put a fee on it, thus offering a financial incentive for people to get vaccinated and allowing the company to stop short of outright mandating it.

The problem Delta Airlines and the other employers who are opting for surcharges will likely face is that the Affordable Care Act forbids discriminating against an employee based on their medical history.

Getting a vaccine, however logical and laudable, is still a matter of medical history, and so charging people a fee based on whether or not they have gotten the shot is sure to be a question that lands in front of a judge.

Astute observers will be quick to point out that some companies are already charging a surcharge for employees who smoke tobacco. But, the thing about tobacco surcharges is that the ACA specifically allows for those in its legislative language.

No such language is there to support vaccine surcharges.

To fill the legal void, the Equal Employment Opportunity Commission made a ruling that some employers are pointing to in order to justify their surcharges. In that ruling the EEOC said that so-called “incentives” are allowed as a means of getting employees to take a vaccine.

It stops short at the employee, however, so even under this justification, mandating that an employee’s family member who is also insured get vaccinated would be going too far within the walls of this justification.

Based on the EEOC, Delta Airlines and the other employers would presumably argue that their incentive is that vaccinated employees don’t have to pay for that surcharge.

In this sense, the surcharge is actually more akin to a workplace wellness program to encourage good behavior, rather than a penalty based on medical history.

But one problem with that logic is that the EEOC rule mandates that incentives cannot be “coercive,” and employees will surely argue that $200 per month is by definition coercive.

Unless federal regulators step in and make a ruling clarifying this, and probably even if they do, the question of the legality of COVID surcharges is almost certainly going to fall to a judge to decide.

That is what happened in Houston when employees of the Methodist Hospital chain protested their employer’s mandate that they get the vaccine, but that ended up being upheld in the courts, leading to more than 150 of the employees to be ultimately fired for refusing vaccination.

It will be interesting watching the COVID surcharges as they play out and how it will affect health insurance rates.

Travel Insurance

Travel insurance has had a surge in interest since COVID hit the travel industry. Skittish travelers turned to these policies to mitigate the risk of travel in uncertain times, and as fall travel plans solidify, many are now looking hard at travel insurance policies.

That renewed interest has also led to a crash course for many people into what travel insurance is, what it covers, and what it does not cover.

On the one hand, travel insurance makes great sense in a pandemic. If people are regularly falling ill, having an insurance policy to cover a trip you can no longer take because you contract COVID-19 makes a lot of sense.

And in that sense, travel insurance has been performing above expectations.

But what a standard travel insurance policy will not do is protect you if you choose to cancel your trip because your dream destination is now a COVID hot spot.

Travel insurance does cover trip cancelation, but the cancelation has to be caused by a covered reason and beyond the traveler’s control.

So, if a hurricane ravishes a city two days before a trip is scheduled, or a wildfire sweeps through the valley you are about to visit, that is where travel insurance shines.

But standard travel insurance does not cover fear of travel. For that, you need to purchase a more expensive Cancel For Any Reason policy. These let you back out of your trip and still get coverage, but they don’t cover nearly the same amount as a standard policy, and they cost substantially more.

That said, the calculus of whether a travel insurance policy makes sense is still largely the same as it was before the pandemic.

Travelers should look at the nonrefundable up-front costs involved in the trip – deposits, prepayments, and the like – and they need to see what the cancelation and change policies are for those payments.

If someone has to write a four-figure check for a deposit on a beach house that would be forfeit if the trip doesn’t happen, in that case travel insurance makes great sense.

But if that same trip was to a hotel that allowed them to back out within 24 hours with no penalty, that same policy may be overkill.

It is important to know, however, many international destinations are now requiring travel insurance policies as a condition to land a visa in the first place, and that is because of the portion of the policy that covers health care while you travel.

If you travel to Costa Rica, your health insurance may not cover you in network anymore, but your risk of contracting COVID doesn’t diminish.

A travel insurance policy would step in to pay those uncovered expenses, and even pay for a medical evacuation if you need to be airlifted to a more capable facility for better care.

So, in addition to nonrefundable upfront costs, a hard look at your health insurance policy might also offer a solid trigger for whether travel insurance makes sense in the time of COVID.

Life Insurance

The first, most comforting thing to know about life insurance during the pandemic is that if someone has an existing life insurance policy and then dies of COVID-19, the policy would pay out just like it did for any other sickness.

But that doesn’t mean the life insurance industry hasn’t felt effects from the pandemic.

One of the primary influences was that during the lockdowns, paramedical exams that have traditionally been required to rate someone’s insurance premium, in many cases were waived. That means that many insurance policies became more comfortable foregoing the medical exam, and in many cases turned toward automated underwriting using tools like public records and medical records to come up with a premium instead.

Now that the widespread lockdowns have been lifted, many insurers are moving back to the paramedical exam, but plenty have stuck with that automated no-exam policy.

Another artifact from COVID is that if someone has contracted COVID-19, or even if they traveled to a COVID hotspot, new policies often now come with 30-day waiting periods before the policy takes effect. That way if someone suddenly contracts the virus, the insurer can wait to see how they recover before the policy is on the hook if they die.

There have been some reports of certain policies being temporarily put on hold – such as companies not writing new 30-year term policies – and other reports of applicants over 80 and in some cases over 70 being prevented from applying for new policies. So far, those reports are not widespread, but they may be trends worth watching moving forward.

The big question mark for the life insurance industry is how it is going to handle people who already contracted COVID, or worse, are suffering from a so-called long-COVID infection. Because it is too early to see how those factors will play in to someone’s life expectancy, it is unclear if premiums will begin to reflect those diagnoses.

For now, though, it is a wait-and-see situation.

Auto Insurance

At first blush, auto insurance may not seem like it has many COVID-19 implications, but this fall, there has been a bit of a virus-related blowback for many of the insurance companies.

During last year’s lockdowns, people largely parked their vehicles rather than drive them on their daily commute or for carpool and soccer practice.

With fewer miles driven, there were fewer accidents, and so many of the insurers offered rebate checks to their policyholders.

And while people were surely happy to receive those checks, a pair of studies – from the Consumer Federation of America and the Center for Economic Justice – came out this fall that suggests that some auto insurers under refunded policy holders by as much as $125 each.

For its part, the auto insurance industry largely disputes those studies’ findings.

Ultimately, whether those refunds were too skinny will likely be an issue for each state’s insurance regulator.

But for the typical consumer who feels like they are paying too much, the important message is to hang in there and don’t cancel their auto insurance policies, even if they are driving less.

Having a gap in coverage almost always leads to higher rates when they purchase the policy again, negating any possible savings from not paying while the car is parked. Not to mention, if someone drives without the state minimum liability insurance, they will be breaking the law and facing huge fines, or worse.

Dropping everything except the state minimum liability policy sometimes makes sense, but that would mean that any damage to the vehicle would have to come out of the driver’s pocket.

In the case of an accident, not having a collision policy could be costly.

But during hurricane and wildfire seasons this fall, not having a comprehensive policy could also cost you, because it is that portion of the policy that protects you from natural disasters.

People who are driving less may instead turn to a telematics device or even a pay-by-mile plan. With those, you plug a sensor into your vehicle’s diagnostic port, and that sensor beams your driving patters back to your insurer, who can then adjust your rate according to your driving habits.

In most cases, people pay less when they opt in for one of these programs, but not always. If you have an especially heavy accelerator foot, or a particularly long commute, or you like to ride your brakes, you may actually end up paying more. Not to mention the fact that many people find the loss of privacy unsettling to begin with.

Vaccines, test and boosters

As fall arrives, one piece of good news is that COVID vaccines, including the potential upcoming booster shot, all are free to the patient.

All vaccines, including the COVID shot and any boosters, must be covered by any health insurance policy governed by the Affordable Care Act, including most employer-based plans, Medicare, and Medicaid.

COVID shots are also free for uninsured people through the Health Resources and Services Administration program. All an uninsured person has to do is show up and the provider will give the shot free of charge and then take care of the paperwork on their own.

The same is true of COVID tests. Thanks to the Families First Coronavirus Response Act anyone can get a COVID test free to them through community health centers and certain pharmacies and providers.

Now, when it comes to other vaccines, it isn’t quite so cut and dried.

Obviously, ACA-compliant insurers will cover other vaccines, such as the flu shot.

But for the uninsured, getting a free jab isn’t quite as easy. There are ways for uninsured people to get free or low-cost vaccines through community clinics and vaccine drives, and there are even some retailers and pharmacies that offer free shots as an incentive to get you in the store.

But, unlike the COVID shot, getting a free flu shot if you are uninsured is not automatic.

Hurricane Season

With Southeast Louisiana and the Eastern Seaboard recovering from Hurricane Ida, it is important to know that hurricane season is just now hitting its seasonal peak.

The best protection from a hurricane, other than evacuating before it hits, is to ensure you are properly insured for a hurricane, which means a homeowner’s policy (or a renter’s policy) and a flood policy.

Homeowner’s policies pay for any damage done by the storm’s wind and rain.

So, if a window is blown out, or the roof is shredded, a garage or fence is crushed, or trees are toppled, those are all covered by typical homeowner’s insurance policies – presuming windstorms are not specifically excluded. If windstorms are excluded, you have to get a separate windstorm policy, often from the state insurer of last resort.

Homeowner’s policies also contain a “loss of use” provision that step in to cover you if you are forced to evacuate, though they may only kick in if there is a mandatory evacuation, so check your policy language. But those provisions help pay for things like hotels during the evacuation and while your home is made livable again.

It is important to know that in most storm-prone areas, homeowner’s policies have separate “named storm” deductibles, which are often substantially higher than a typical homeowner deductible.

And also know that flood is never covered by a homeowner’s policy. The good rule of thumb is if water enters your house from above or is blown in by wind, a homeowner’s policy will kick in. But if the water rises from below or comes in by the floor or under a door, you need a separate flood insurance policy to cover you.

And floods are by far the most common natural disaster, and one in five flood claims happen outside designated flood zones. This was especially evident as Ida wreaked havoc in the Northeast, half a nation away from where Ida made landfall.

Conclusion

Whether fall means heading back to work, finally taking that long-postponed trip, getting a vaccine booster shot, or nervously watching the tropics, insurance implications abound.

The coming months promise a showdown over COVID-19 health insurance surcharges that will likely make headlines as they move through the courts. Hurricanes will surely keep costal residents on their toes. And fall may be a natural time to reevaluate life and auto policies.

But in the end, insurance is about managing risk, and while the seasons and details change, risk is one of life’s constants.