How Does Inflation Affect Life Insurance?
Supply and demand drive our economy. But when these two variables become misaligned, something must give. Inflation will likely follow if the supply of money increases too fast or a particular good or service becomes scarce. And when inflation creates significant increases in prices, owners of life insurance policies should notice.
What is Inflation?
We all experience inflation. Inflation is when the general cost of goods and services steadily increases. Without a similar rise in wages and income, the same dollar today will purchase less of the same goods and services tomorrow.
Our Federal Reserve attempts to keep inflation around 2% annually by altering the money supply. However, historically, the U.S. economy has seen inflation average just over 3% per year. The worst year of inflation occurred after WWII, when the average cost of goods and services climbed more than 18%.
Inflation’s Impact on Life Insurance
When it comes to the impacts inflation has on your life insurance policy, the most significant is the erosion of the death benefit’s buying power. For example, if you purchase a 30-year term policy worth $1,000,000 today, its buying power could dwindle to just $412,000 by the time the contract expires.
Fortunately, there are several options to help combat inflation’s effect on your coverage:
Indexing: A few life insurance policies will automatically increase your death benefit by a metric tied to inflation, such as Consumer Price Index (CPI).
Inflation Riders: Riders add additional coverage to your policy. An inflation rider can increase the policy limits on a scheduled basis by a fixed percentage (usually 2% or 3%) to offset a rise in inflation.
Coverage Boost: Some insurance companies allow you to increase coverage with little to no medical underwriting to help battle inflation.
Inflation’s ability to zap the dollar’s value means it is vital to review your policy annually. Each review provides an opportunity to reassess whether the death benefit purchased initially will continue to be enough. If it is time to review whether your life insurance has kept up with inflation, contact my office Today.
- Aging and Our Body’s Ability to Heal Itself
- Keeping Health Insurance After a Layoff
- Waking Up to the Impact of Insomnia
- How Life Insurance Benefits Women
- What experts say about raising the retirement age
- Coverage for healthcare treatment denied? Here’s what you can do.
- Sharing the Road with Cyclists
- Buying Life Insurance for an Elderly Parent?
- Medicaid Unwinding: Your Questions Answered
- Living Your Best Life After 60
- Buying Health Insurance: A Millennial’s Guide
- Self-Love Ideas for Valentine’s Day
- Life Without Clutter
- Set Yourself Up for Success with Your Fitness Routine
- Winter Hydration – Do I Need It?
- I’m 60+; Do I Need Life Insurance?
- Why Do I Keep Breaking My New Year’s Resolutions?
- Closing Out the Year with a Smile!
- How to Enjoy a Long Layover
- 6 Cold Weather Safety Tips
- 10 Tips for Managing Cholesterol Levels
- How Much Life Insurance Do You Need Right Now?
- 3 Top Tips for Better Posture
- Building Bone Density for Seniors
- Living Outside Your Comfort Zone in Retirement
- 3 Top Habits that Lead to a Happy Life After Retirement
- Should You Insure Your Gifts?
- Everything You Need to Know When Retiring Under 65
- 7 Benefits of Slow Travel
- Utilizing Medicare Preventative Services
- The Harsh Reality of Credit Card Fees
- Keeping Your Health Insurance Affordable
- 7 Tips to Weather Challenging Periods in Your Life
- What is a Variable Annuity? 4 Key Details You Should Know
- 4 of the Best Ways to Stay Healthy this Summer
- How to Prevent Sun Damage to Your Eyes
- 3 Tips for Safer Grilling
- When the Sun is NOT Your Friend (What You Need to Know about Sun Exposure)
- Tips to Avoid Stress Eating
- Common Exercise Pains – How to Work Past Them and When to Call for Help
- Signs Your Identity Has Been Stolen (and what to do about it)
- How Does Inflation Affect Life Insurance?
- Know the Benefits of Walking
- Do Brain Food Supplements Really Work?
- Ways You Can Spend Less on Gas
- What Are Alternatives if LTC isn’t Right for You?
- 4 Tips for a Less Stressful Summer
- Veteran and Medicare Benefits Work Together
- What are the Safest States From Natural Disasters?
- How to Choose an In-Home Care Provider for Your Loved One in 5 Steps
- 7 Myths About Your Back Pain
- 5 Foods that Will Help Keep Your Mind Healthy
- Don’t Throw Away Those Used Coffee Grounds
- I’m 50 Years Old. Should I Keep My Life Insurance?
- How to Spot Government Imposters
- 5 Mistakes to Avoid When Buying a Life Insurance Policy
- Happiness Through Healthy Food
- 5 Step Checklist to Choosing a Health Insurance Plan
- 5 Creative Spring Décor Ideas
- 10 Ways to Maintain Healthy Joints
- 3 Incredible Healthcare Smart Technologies Coming Your Way
- Do I Need a Long-Term Care Plan?
- Senior Diet: To Meat or Not to Meat
- How to Take Care of Your Personal Intangible Assets
- Dream All-Inclusive Trips to Escape the Cold
- How to Get Health Insurance if You’re a Freelancer
- Safety Tips for Driving in Winter
- Ways to Locate a Lost Life Insurance Policy
- Critical Times in Life that You Need Life Insurance
- Giving and Forgiving
- Why Buy Life Insurance on Children
- Things We Are Grateful for This Year
- What to Avoid When Switching to Medicare from the Public Health Exchange
- Peoria's Best Health Insurance Agency 2021
- How to Host a Successful Virtual Holiday Party
- Is One of These Factors Keeping You from Seeking Life Insurance?
- Who Invented Insurance Anyway?
- Common Senior Micronutrient Deficiencies
- The Art of Aging Well
- New Energy After 60? 4 Ways to Biohack Your Health
- Insure What? Celebrity Body Parts Insured
- Ways to Enjoy the Outdoors at Home
- Using HSAs in Your Retirement Planning
- Meditation: Seizing the Moment
- 6 Strange Insurance Policies You Can Buy
- How Valuable Is Cash Value Life Insurance?
- Mistakes You Can Make When Exercising at Home
- Why You Should Never Lie to the Underwriter
- 3 Vegetables You Can Plant and Grow Anywhere Right Now!
- Forget Salad Recipes, Try a Salad “Matrix”
- Benefits of Dental Insurance