Why life insurance is (even) more essential during a recession

For a lot of people, life insurance is something you get when life is good — you’re married, maybe you’re expecting, and you’re thinking about maintaining your family’s financial security if you passed away.

But what about when life isn’t so good? Should you take out a life insurance policy if you’re worried about losing your job — and with that, the income that you’d use to pay your premiums? Or even if you’re just being a bit more cautious these days. Where exactly does life insurance fit into a freshly tightened budget?

An affordable term life insurance policy is one of the best ways to protect your family in both good times and bad — because if there’s one thing we know about life, it’s that it can be unpredictable. That’s why life insurance is just as important during a recession as it is during a period of economic growth. In fact, it’s even more valuable to have your life insurance policy in place when times are bad. Here’s why.

Life insurance provides a financial safety net

“I think you just need life insurance, period,” says Betty Wang, CFP®, founder and president of BW Financial Planning and advisor at the XY Planning Network. “It’s a safety net for the people you love.”

If the worst-case scenario were to happen, a term life insurance policy can provide much-needed financial security — and this security becomes even more important when times are tough. Life insurance is designed to help your loved ones cover the cost of your funeral, pay off bills and debts and plan for the future, all of which might be harder to fit into a budget during a recession. Since term life insurance policies are most affordable when you are young and healthy, it’s a good idea to shop for a life insurance policy online early so that you can lock in the lowest possible monthly premium. For example, a healthy 30-year-old woman can buy a 30-year, $500,000 for only $28 per month. The premium will remain the same for the entire term of 30 years.

Who needs life insurance? If you have a partner, children or aging parents who depend on you financially, you’re going to want to take out a life insurance policy. “Life insurance is a must for married couples,” Wang explains, “and for anyone who has someone who is dependent on their income or their potential income. If you have elderly parents, if you have children, it’s a must.”

Life insurance can help your family keep their home

Whether you’re paying rent or paying a mortgage, a term life insurance policy can help your family continue to make those payments after you’re gone. This becomes even more important if you are the primary earner in your household, or if your family has trouble making ends meet without multiple incomes — and this kind of protection is absolutely crucial during a recession, when one or more family members might find themselves unemployed and household income might be lower than usual.

There are many reasons to purchase term life insurance, but the biggest reason might be that a good life insurance policy can help protect your family from losing their home or needing to sell if a partner died. If there’s one financial benefit you’d like to leave your loved ones, make it the ability to keep making those rent or mortgage payments without concern.

Life insurance can help pay off debts

If you lose your job during a recession, you might find yourself turning to credit cards to cover everyday expenses — and, like many Americans, you might end up in a little bit of credit card debt.

Whether you’re in debt now or are worried about going into debt in the future, a good life insurance policy can help your loved ones cover those outstanding debts if something were to happen to you. If you and your spouse share a credit card, for example, or if you and your parents cosigned a student loan, the proceeds from a life insurance policy can help with those debts after you die.

Life insurance can help cover the gap if the stock market drops

The stock market has been extremely volatile over the last few months, and many of us are concerned about what might happen to the value of our investment portfolios and retirement funds. “I think it’s changed people’s perspective that the market is always going to go up,” Wang says.

Life insurance can be one way to help cover the financial gap during a bear market. If you have a term life insurance policy, you know that your beneficiaries will receive a life insurance payout after your death — no matter what happens to your investments or retirement accounts. That kind of peace of mind can help you feel more at ease even during the market’s unpredictable ups and downs.

Life insurance helps you prepare for the unexpected

The stock market isn’t the only thing that’s unpredictable right now. “I think the possible recession — and the coronavirus in general — shows that you don’t know what will happen,” Wang explains.

It’s hard to anticipate what life might be like six months or a year from now. Will we be employed? Will we still be practicing social distancing? Will we feel anxious or hopeful about the future? All we know is that the next few years might turn out to be nothing like we anticipated.

When life is unexpected, life insurance can help provide stability. Use a life insurance calculator to determine how much coverage you might need and what it will cost, or apply for a term life insurance policy online. Remember, you’re doing this to build a safety net for the people you love — or, as Wang puts it, “To pay off your mortgage, to pay off your credit card debt when you die, to help provide your spouse and your children with an easier life.”