Why Do You Need Life Insurance During a Recession?
Times are tight right now. Although it’s tempting to cancel your life insurance policy to save on monthly payments or put off buying one, it’s usually the wrong move to dump your life insurance during a recession.
Protect Your Family with Term Insurance if the Unthinkable Happens
Even if you’re healthy, there’s always a chance you could fall victim to an accident or violence during an economic downturn. Should that happen, how would your family survive a recession without your income?
If you don’t have life insurance, consider purchasing a term policy to protect your family over the short term. A term life insurance policy is the most affordable choice, especially for healthy individuals, yet provides you with a lump sum, as well as mortgage protection and income replacement, should you pass away unexpectedly.
Leverage Whole Life Insurance as an Emergency Fund
If you already own a whole life insurance policy, the last thing you should do is let it lapse. Although it can save money over the short term, it can prove costly over time.
If you’ve had your whole life policy for a while, you’ve likely built up cash value in the policy. During a recession, you can use that reserve to “borrow from yourself” rather than turning to high-interest credit cards to meet unexpected expenses. Having the ability to take out a policy loan can make the difference between going into deep debt and coming out of the recession in good financial health.
In addition, if your whole life policy is with a mutual life insurance company, you might earn dividends on your policy every year should the company have a surplus at the end of each year. Those dividends help you grow your policy’s cash value, giving you a rainy-day fund for future economic downturns.
Although whole-life premiums tend to be higher than term-life payments, they never vary over the life of your policy. Additionally, if you allow it to lapse, there’s no guarantee that you can purchase a policy at the same rate in the future. In fact, they’re likely to rise as you age — and if your health declines, there’s no guarantee that you will qualify for another whole life policy in the future.
With a whole life policy’s potential to grow, it’s usually in your best interest to treat it as an investment, especially during a recession. As Investopedia advises, it’s a prudent strategy to avoid selling off investments during an economic downturn. Instead, use your policy as your personal “bank” as a backup should you deplete other sources of income or emergency savings.
Weather the Recession with Peace of Mind
If you’re worried about your financial situation during a recession, United Benefits Specialists can help you plan a strategy to weather the storm. Use the form below to get in touch.