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What a Recession Means for Your Life Insurance

By Jessica Sillers Jan 31, 2023

In this article

Can You Afford Life Insurance in a Recession?

Is Life Insurance Recession-Proof?

4 Reasons to Buy Life Insurance in a Recession

Economic indicators across the world are showing that many countries are most likely heading for a recession, including the United States. Recessions are an unavoidable part of an economy, like the dips on a rollercoaster, but they can be worrying for families. 

The best protection against a recession is preparing a strong financial foundation. Building emergency savings that can hold up to a recession, planning for college even if the economy takes a dip, avoiding debt and using tools like life insurance can all help you feel financially secure. Here’s what you need to know about how to approach life insurance in a recession.

Can You Afford Life Insurance in a Recession?

One of the hardest aspects of a recession for most people is job loss or increased uncertainty over your income. Businesses tend to respond to a recession by cutting costs where they can. That often translates to laying off workers. 

Unlike inflation, which raises prices for everyone, a recession may impact some families hard and not have much effect on others. But it can be hard to predict exactly which industries are likely to have lots of layoffs and which will stay more stable. 

In the face of this complicated puzzle, having life insurance can be a form of financial protection for your family in a worst-case situation. With life insurance, you pay a monthly premium and in return the insurer will give your beneficiaries a predetermined amount of money if you pass away while the policy is active. Of course, paying your life insurance premiums can be hard on a tight daily budget, especially if you are nervous about getting laid off. For some families, it comes down to: “Would my family be able to afford everything they need if I wasn’t around?”

Here’s what to do if you’re concerned about adding life insurance to your budget:

  1. Get a quote on a term life policy: Term life insurance can offer coverage much more cheaply than most permanent options. Compare providers, and you may find that life insurance is a lot more affordable than you thought.

  2. Choose a shorter term: You might be able to save some money by choosing a shorter term for your policy (e.g., 15 years instead of 30 years). Your ideal term length will depend on your needs, but if you’ll pay off your mortgage and send your kids to college in 15 years, you may not need extensive time beyond that. You may also feel more secure having coverage now, even if you need to change policies later to fit your needs best.

  3. Lower the face value: A smaller face value, or amount of money your loved ones would receive if you pass away, can bring down premiums as well. Having some coverage can be better than none, and you can apply for a different policy when you’re in a better financial position.

  4. If you’re already struggling to meet your basic needs, life insurance might have to wait. Take care of the essentials you need to, and set yourself a reminder to check back in on insurance in a few months.

If you already have a life insurance policy, a recession shouldn’t change how your policy works. Most life insurance policies have fixed premiums that won’t change. Your coverage value also stays the same. As long as you’re paying premiums, you don’t need to do anything else to make sure your life insurance coverage is still there for you in a recession.

Is Life Insurance Recession-Proof?

If you’re a parent, you’re probably used to thinking about the future. Anything from buying next year’s swimsuits when they’re on sale in the fall to contributing to a college account can help you prep for your kids’ future needs. Stock market slumps in a recession can be an uncomfortable reminder that “savings” like retirement accounts and college funds can take a loss in a downturned market. 

Your life insurance policy isn’t subject to the same ups and downs as money in the market. Life insurance companies must meet stringent regulations to prove they can pay the benefits they promise and that they have a certain amount of funds available to pay claims. Life insurance providers also pay into a guaranty fund, which is a state-owned fund that can act as a source of back-up funding if an insurance company were to go under.

All of which is to say, you can generally feel extremely confident that a life insurance policy is good for the money, even if the stock market isn’t doing well. That can be extra peace of mind that your family can have funds they can rely on even if you passed away.

4 Reasons to Buy Life Insurance in a Recession

Even financially savvy people can end up putting off tasks like getting life insurance, just because there are so many other things on their plate. My family welcomed a baby, bought a home, and changed schools in the span of 10 months, and to say it’s been busy is an understatement! Here are some reasons to squeeze in a life insurance application anyway:

  1. Protect your house: Will home prices keep rising? Will the housing market crash? No one knows for sure. Life insurance can help cover what’s left on your mortgage so you feel confident your family will be able to stay in their home even if you weren’t around.

  2. Pay off debt: Nearly half of Americans have taken on more credit card debt since the pandemic, and 1 in 3 say it’ll take more than two years to pay off the balance. A recession might also lead you to lean on credit cards more often. Life insurance coverage can provide a sense of security that you won’t saddle your family with debt they can’t handle.

  3. Provide a safety net: Some backup plans are easy, like going to the movies if a beach day gets rained out. Others can upend your whole family. Your loved ones depend on your financial contribution. Even though nothing can replace you, you can provide some financial stability with life insurance so your family doesn’t have to worry about day-to-day expenses.

  4. Life insurance can be easier than you think: Getting life insurance doesn’t have to be an exhausting process. Online applications or no-exam insurance options can make getting life insurance quicker and simpler than you might expect.

You can’t stop a recession from coming, but you can take action to help minimize the impact on your family. Steady financial habits, like saving money and having backup plans like a life insurance policy, are tools you can use to build a sturdy foundation. Even if money or time is tight, life insurance may offer advantages like easy applications and affordable policy options to help you avoid stress and get coverage you need.

Fabric exists to help young families master their money. Our articles abide by strict editorial standards.

Fabric by Gerber Life exists to help young families master their money. Our articles abide by strict editorial standards.

Information provided is general and educational in nature and is not intended to be, and should not be construed as, financial, legal, or tax advice. Laws of a specific state or laws relevant to a particular situation may affect the applicability, accuracy, or completeness of this information. Federal and state laws and regulations are complex and are subject to change. We make no warranties with regard to the information or results obtained by its use, and disclaim any liability arising out of your use of, or reliance on, the information.

Fabric by Gerber Life offers a mobile experience for people on-the-go who want an easy and fast way to purchase life insurance.

Written by

Jessica Sillers

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Term Life Insurance Policy Series ICC22 2205-4004 WSA and Accelerated Death Benefit Rider policy series ICC22 2205-2623 WSA (and state variations where applicable) issued by Western-Southern Life Assurance Company, Cincinnati, OH which operates in DC and all states except NY, and distributed by Gerber Life Agency, LLC using Fabric Technologies. Gerber Life Agency, LLC is an affiliate of Gerber Life Insurance Company (est. 1967). All are members of Western & Southern Financial Group (Western & Southern). Issuance of coverage for Term Life Insurance is subject to underwriting review and approval. Please see a copy of the policy for the full terms, conditions and exclusions. Product provisions, availability, definitions and benefits may vary by state. Payment of benefits under the life insurance policy is the obligation of, and is guaranteed by, the issuing company. Guarantees are based on the claims-paying ability of the issuer. Products are backed by the full financial strength of the issuing company.

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