This is a good time to consider how you are paying for your life insurance because as this recession deepens, strict budgeting is becoming more and more a necessity.
When it comes to life insurance bills there are definitely different feelings about how often and how to pay. For me, getting an annual bill for however much always seems to catch me by surprise and always has a knack for coming at the wrong time. As for me and my family protection the small extra cost of having my policies on a monthly bank draft is worth it. No surprises and small budgeted amounts. For others saving that 5% or so by paying annually is significant.
Now that times are tougher, picking the right billing method or changing your current coverage to a new billing method just might be what it takes to make sure your family’s protection is protected. Having that $1000 annual bill come due when times are good and there’s plenty of income and extra money is one thing. When times are tough it may pay to call your agent and ask them to change it to monthly or quarterly for a while so the bite isn’t quite so big.
The lapse rate on in force policies has definitely gone up during this economic meltdown. Too often people, especially those who get talked into universal life and whole life policies, overload themselves with premiums. We, as a country, have tended to overload ourselves with debt forgetting that good times aren’t a guarantee. I always encourage clients to think long and hard about budget before they pull the trigger on a new insurance policy. Your family’s protection shouldn’t be a victim of a bad month or an unexpected expense like a car repair.
I would rather see a family have $250,000 of term insurance in force that they know they can afford even in tough times than to have them carry more and lose it at a time when it’s needed most. Keep in mind that the other life insurance we have is our net worth. During a recession like this our net worths have been plundered. An unexpected death right now would have a double impact if your life insurance lapsed and your net worth wasn’t worth much anymore.
Bottom line. Do what you need to do to make sure your life insurance isn’t a victim of the recession. If that means changing payment modes, do it. If that means dumping that expensive cash value policy and taking out an affordable term insurance policy, do it. If your insurance lapses, contact your agent right away and see what the alternatives are.