Life insurance shouldn’t be a luxury. Something that you can buy when times are good and can be dropped when things get tight. The need for life insurance, if anything, is more essential during bad economic times.
Not that there is a good time to leave a family without income that is important to maintaining the family’s lifestyle, but bad economic times make an untimely death even worse.
The options for replacing income without life insurance are:
1. Those left behind have to get a job, or a second job. In case no one has noticed, during our current financial downturn jobs are not overly abundant.
2. Tapping into sources of equity such as selling real estate or tapping into stocks or retirement accounts. Again, in our current situation I think it’s pretty plain that selling real estate is tough and takes a long time. This would probably not be the best time for tapping into investments either with just about everything worth a little less than it was a year ago.
That’s why lifeÂ insurance has to be budgeted and affordable. Too many people go for the gusto and buy whatever they can afford at the moment, not giving a lot of thought to what those payments might mean down the road. Keeping your family together and financially secure is a priority that shouldn’t be bulked in with the luxury budget.
So, know what you can afford to budget and keep in force even when the bottom drops out of things. Don’t buy whole life! The rate of whole life policies lapsing during tight times is high because the premiums are high. While you’ll be told you can borrow from the cash value to make the premium payments, be careful with that one. Tapping cash value is the number one cause of whole life and universal life policies crashing and burning.
Buy term insurance and if the only thing that is budgetable is 10 year term, buy that with a goal of working toward getting the term length you might really need. Remember. Affordable insurance first.Â Investing second and separate.
Bottom line. This whole economic bust has to teach us some lessons. People mortgaged to the max never considering what could happen if things went sour. Now families are losing the roof over their heads at an alarming rate. It may not be easy, but make your family’s security first and foremost.