The economy of 2022 is, to put it mildly, not looking well. We can place the blame in a number of different areas, but assigning blame does not reduce inflation; only effective economic policies do.
Americans currently pay $5 per gallon for gas, and the price of diesel doubled in the previous 18 months. We’re dealing with general price rises for food and the majority of other essential goods that American families depend on every day.
We will pay more if a product needs to be transported by truck, train, aircraft, or ship due to the rapidly rising cost of gasoline. The worst part is that inflation can appear virtually immediately. There’s no doubt that individuals “in the know” tried to warn us, but who truly listens to them?
Will my life insurance rates increase as a result of inflation?
Starting with some positive news is only fair. If you’re worried that the inflation of today or tomorrow will increase your insurance rates, you shouldn’t be since they won’t.
Whether it’s a term policy or a permanent policy like whole life insurance, your rates are fixed once your life insurance policy is issued and will not change.
Life Insurance, term
If your insurance is term, you only need to be concerned about premium hikes if you decide to renew your coverage or when it expires.
For this reason, you should think about purchasing term life insurance today for the greatest duration that your budget would allow. Term policies were typically available for 5 to 30 years, but recently, a number of life insurance firms have begun to provide 35 and 40-year policies, depending on your age.
Term life insurance policies are offered by some businesses with rates that adjust (always go up) every one to five years. Purchase those not. Although they may be less expensive up front, you will ultimately pay more for life insurance than if you had opted for a 20 or 30-year policy.
Take a deep breath and unwind if you currently have a term life insurance policy with 5, 10, or 20 years left on it. But keep in mind that the rates will depend on your age at renewal and will be much higher if you renew it or convert it at the end of the term.
Integrated Life Insurance
The insurance company cannot raise your rates for the rest of your life after your whole life insurance policy has been issued, similar to level term life insurance. A portion of the premiums you pay for whole life or universal life insurance are transferred to a cash-value account, despite the fact that these policies are substantially more expensive than term life insurance.
Even better, because the cash value account receives a guaranteed interest rate that is added to your account tax-deferred, your money rises in cash value over time. Additionally, if you bought your policy from a mutual insurance firm, you will get profits that you can use to acquire fully paid life insurance (small additional policies that earn interest and dividends). As a result, unless you opt to take all of the interest credited to your account, you won’t have to pay taxes on it. However, if you want to withdraw just the portion that is considered premium, the withdrawal is tax-free because the premiums you’ve paid were made using after-tax money.
What about how Inflation Affects My Budget?
Wonderful query! Many policyholders overlook how crucial life insurance is for providing for their families financially. When times are extremely difficult, these policyholders cancel or cash in their life insurance plans (like right now).
Let’s talk about why you bought your policy in the first place and what might happen if you cancel and then try to buy a new policy when the inflation declines and your budget stabilizes again before we examine how you might avoid canceling your policy because inflation is killing your budget.
The reason you purchased life insurance
The majority of people who buy life insurance do so to give their surviving loved ones the financial means to carry on after they pass away. Most people desire the ability to replenish their money for necessities like:
- Living costs for surviving family members
pay off the family’s mortgage on the home
- Give a child or children the money they need for college fees
- Make the necessary contributions to a surviving spouse’s retirement plan.
- A separate group of persons are compelled to get life insurance by a divorce judgment. If this applies to you, you won’t be able to cancel your life insurance policy without facing serious consequences from the court.
Another subset of people buy permanent life insurance to support an LIRP (Life Insurance Retirement Plan), and they can cancel this life insurance without paying penalties, much like they can cancel a 401(k).
What May Occur If You Need to Replace a Policy That You’ve Canceled
Life occurs, so it’s risky to cancel a life insurance policy with the intention of buying it again later.
This means that your age, health, and death benefit were the main determinants of the rates on the policy you’re considering canceling. What happens then if you are given a medical diagnosis between now and the time you try to replace the canceled policy? You’ll also likely be older, and your condition might affect your rates.
Additionally, you can be sure that many firms will accept rate increases due to their anticipated increases in operational costs if life insurance companies start to feel the financial impact that families are suffering. Just keep in mind that life happens before you press the “cancel” button.
There is little question that life insurance and inflation are major concerns for all Americans, particularly for those who were already struggling. We need to take care of our family, eat, and commute to work.
Without a doubt, the latter is more significant to most Americans, and as a result, you would be seriously mistaken to view life insurance as optional.
Call us at 866-868-0099 during regular business hours or send us an email if you are thinking about getting life insurance right away or are worried about your ability to pay for an existing policy.