Why Do You Need Life Insurance During a Recession?

During times of recession, paying for a life insurance policy might not be a top priority for most people. But it is actually even more important to have a safety net for your loved ones when times are bad.

Things to consider from an insurance standpoint during a down-turned economy

Do life insurance rates go up during a recession?

If the policy you purchased for life insurance was a term policy, no need to worry, your premiums will not go up until the term of total years purchased has expired. If the life insurance is a universal life (UL) then rates can go up depending on interest rates so yes, recession could play a factor.

If the policy is whole life the premiums will stay the same forever, or until you die.

Should I buy a term life policy instead of a whole life policy?

You buy term insurance to provide an important safety net for anyone that depends on you financially. Your beneficiaries can use the money to repay debts, replace your income, or provide funds for future expenses like college tuition.

Can I withdraw from my existing policy without reducing the coverage?

You can only withdraw funds from Universal life and whole life policies, term life has no cash value until you die. If you do withdraw from a UL and do not pay back the amount you borrowed, your premiums will go up. If you borrow from a whole life policy, you don’t have to pay back what you borrowed, but your death benefit will be reduced.

Will my insurer still be able to pay out death benefits during a recession?

The short answer is, yes! Insurance that will pay your death benefit is paid out by your premiums. Reputable insurance companies set up sufficient reserve funds to cover their commitments, no matter the economy’s downturn.

What are the odds of an insurance company going bankrupt and what will happen to my policy if so?

Insurance companies are regulated by the States, and all 50 have systems in place to protect policyholders in the event of a failure of an insurance company. Understanding how the process works, and what kind of protection you’re getting, is important. In addition, you should know what steps you can take to avoid ending up with an insurance company that goes bankrupt, so that you don’t have to rely on the state to save you.