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

With the economy struggling, protecting your family is more important than ever.

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.

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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.

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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.”

Life insurance is more affordable than you think

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About Nicole Dieker

Nicole Dieker has been a full-time freelance writer since 2012, with a focus on personal finance and habit formation. In addition to Haven Life, her work regularly appears at Lifehacker, Bankrate, CreditCards.com, and Vox. Dieker spent five years as a writer and editor for The Billfold, a personal finance blog where people had honest conversations about money, and is the author of Frugal and the Beast: And Other Financial Fairy Tales.

Read more by Nicole Dieker

Our editorial policy

Haven Life is a customer-centric life insurance agency that’s backed and wholly owned by Massachusetts Mutual Life Insurance Company (MassMutual). We believe navigating decisions about life insurance, your personal finances and overall wellness can be refreshingly simple.

Our editorial policy

Haven Life is a customer centric life insurance agency that’s backed and wholly owned by Massachusetts Mutual Life Insurance Company (MassMutual). We believe navigating decisions about life insurance, your personal finances and overall wellness can be refreshingly simple.

Our content is created for educational purposes only. Haven Life does not endorse the companies, products, services or strategies discussed here, but we hope they can make your life a little less hard if they are a fit for your situation.

Haven Life is not authorized to give tax, legal or investment advice. This material is not intended to provide, and should not be relied on for tax, legal, or investment advice. Individuals are encouraged to seed advice from their own tax or legal counsel.

Our disclosures

Haven Term is a Term Life Insurance Policy (DTC and ICC17DTC in certain states, including NC) issued by Massachusetts Mutual Life Insurance Company (MassMutual), Springfield, MA 01111-0001 and offered exclusively through Haven Life Insurance Agency, LLC. In NY, Haven Term is DTC-NY 1017. In CA, Haven Term is DTC-CA 042017. Haven Term Simplified is a Simplified Issue Term Life Insurance Policy (ICC19PCM-SI 0819 in certain states, including NC) issued by the C.M. Life Insurance Company, Enfield, CT 06082. Policy and rider form numbers and features may vary by state and may not be available in all states. Our Agency license number in California is OK71922 and in Arkansas 100139527.

MassMutual is rated by A.M. Best Company as A++ (Superior; Top category of 15). The rating is as of Aril 1, 2020 and is subject to change. MassMutual has received different ratings from other rating agencies.

Haven Life Plus (Plus) is the marketing name for the Plus rider, which is included as part of the Haven Term policy and offers access to additional services and benefits at no cost or at a discount. The rider is not available in every state and is subject to change at any time. Neither Haven Life nor MassMutual are responsible for the provision of the benefits and services made accessible under the Plus Rider, which are provided by third party vendors (partners). For more information about Haven Life Plus, please visit: https://havenlife.com/plus.html

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