When a recession hits, the economy suffers. This might include higher unemployment, inflation and business failure. With the prices of many other goods and services rising, you might wonder if life insurance rates are also impacted by a recession.
Is Life Insurance Impacted by the Economy?
There are two main types of life insurance: term and whole. Term life insurance offers coverage for a set number of years, after which your policy expires and you must buy another. This type of insurance holds no cash value.
Whole life insurance, which is a type of permanent life insurance, lasts your entire life. The policy accumulates interest over time and the premiums will remain constant. However, the premiums may be higher if you purchase your policy during a time of economic instability, as these rates are determined by the previous year’s performance.
Buying Life Insurance During a Recession
It’s better to buy life insurance before you need it rather than once it’s too late. If you’re considering buying life insurance, there’s no need to put it off due to a recession. Life insurance companies are not greatly impacted by market volatility. In fact, life insurance is one of the most recession-proof industries.
When a recession lasts for longer than expected, insurers have the option to incrementally increase rates on permanent policies for new business, but the changes will likely be minimal if there are any at all. Factors like your health history and age play a much larger role in determining your rates.
Though you may be tempted to let your life insurance lapse during a period of economic difficulty, it’s important to maintain coverage during a crisis, as you never know when you’ll need the protection a life insurance policy provides. If you can still afford to purchase life insurance during a recession, it can be a good way to protect your family in the event of your death.
Existing Policies During a Recession
If you already have whole life insurance, your rates won’t change. Once you have a permanent life insurance policy, you’re locked into the same life insurance rates for life.
You might be concerned that the cash value of your policy will be affected, but stock fluctuations in the market won’t bring down the value of your life insurance. Permanent life insurance cash value does not rise and fall with the economy. However, your insurance company’s financial well-being means more stability for your policy, which is why it’s important to consider the strength of the company before purchasing a policy from them.
There’s No Time Like the Present
Need help getting started? Our representatives can help you find the best insurance for your needs. Americo Financial Life and Annuity Insurance Company offers a wide range of coverage along with benefit amounts ranging from $5,000 to $40,000, and premiums that don’t increase as you age. Get your questions answered now or get an online quote in minutes.