Can I Afford Life Insurance in this Tough Economy?

We are again waking up to depressing economic news as a result of the COVID-19 pandemic. News about a tumbling stock market, record-setting unemployment, small businesses struggling to survive, and projections of a struggling global economy for the long term.

It seems bleak, leaving Americans stunned and worried about whether they can even afford the basic daily necessities. And while people are feeling mortal and fearful about their family’s financial future, they are calling to ask us if life insurance coverage is out of their financial grasp. We understand your fears and want to sensitively address your concerns. Yes, the price of even the cheapest life insurance coverage may in fact not be possible for everyone, if you are out of a job and have applied for unemployment, you may have to wait.

But for others, the price of a policy is more affordable than you think. Why? Because term life insurance rates have been decreasing for decades due to competition among carriers and are now at all-time lows, depending on your age and health of course. So, if you feel now is the time to get added protection for the people who depend on you financially, let us help you navigate the numbers and figure out how much you need and how little you can pay for this critical financial security.

What to Know About Life Insurance

Fact: if you have people— a spouse, children, elderly parents— whom you support, you need life insurance. How much and for how long is where you have some leeway to find an affordable policy, even with the direction the economy seems to be heading. To find the most suitable plan, you have to crunch the numbers to understand how much life insurance you need, and also what type of insurance is best for you.

This is particularly important for Millennials, and younger people as there are clear advantages to obtaining a policy earlier in life, since age is an important factor in determining your premium. The younger and healthier you are, the more options and less you will pay when applying for the most beneficial policies. But regardless of your stage in life, there is coverage available for most of us.

Whether you apply for a “fully underwritten” policy or even those accelerated or simplified issued ones, your health and lifestyle will come into question. You will be interviewed about any preexisting or chronic medical conditions that can affect your eligibility. Be truthful about it because the insurance companies will check medical records to confirm your answers. Your profession, risky hobbies, any bankruptcies, and even your driving record (such as DUIs) must be disclosed.

When it comes to life insurance, there are two main types to consider: permanent and term. Permanent life insurance policies are valid for a lifetime, and while the premiums you pay will be higher, there are more financial benefits. This type of life insurance builds cash value that you can borrow against during your lifetime, but this type of coverage comes at a higher price.

On the other hand, term life insurance has a much lower cost of monthly premiums and is in force for a set term or length of time– anywhere from one year to 30 years. If this policy expires while you are still living, there is no financial payout, but many policies have conversion options regardless of your current health. The other option is replacing it with another term policy, which again, is cheaper than you might think. Of these, the plan best suited for you is going to depend on your needs, such as how long you would need insurance, and how you can best financially prepare for your future.

The Cost of Life Insurance

When trying to make a decision about life insurance, you may be wondering, “Can I really afford this?” Despite what many believe, people often overestimate the cost of life insurance. According to the 2019 insurance barometer study by LIMRA, over half of the participants in the study overestimated the cost of a $250,000 life insurance policy for a healthy 30-year-old to be at least $500 or more per year. In reality, the annual premiums can be as low as $160. With this in mind, the thought of purchasing life insurance becomes much less daunting and is not limited to the wealthy.

For those who are concerned about the cost of life insurance, term insurance is the way to go… with cheaper monthly payments for applicants who do not have the financial ability to pay for a permanent life insurance plan.

Additionally, the more affordable policies with lower monthly premiums may require that you lower the face amount, or death benefit that your beneficiaries would get. But consider that some coverage is better than none. For example, a 15-year, $250,000 policy could have premiums as low as under $20 per month for healthy 20- to 35-year-old men and women. Though premiums do increase the older you are, these sample rates do not increase precipitously for 40-year old policyholders.

This means that this age group, and even some older applicants up to age 50, can pay less than $35 per month for a $250,000 life insurance policy. For some, policies with even higher death payouts can be entirely affordable as well. A healthy 40-year-old man, on average, might be paying about $20 per month for a 15-year $500,000 policy.

With monthly costs that can often rival the payment of cable TV, it could be worth the price of security for your family. Moreover, this data reinforces the fact that the younger you are when you need life insurance, the more affordable the policy will be. Plus, purchasing at a young age with level premiums locks in your rate, meaning that it won’t go up as you age. In other words, getting a $20 monthly rate on a 15-year policy for $500,000 as a healthy 40-year-old male today means you will still be paying the same $20 per month at age 55.

How to Afford It

There are many things you can do to make life insurance more affordable. Lifestyle changes can have an impact on your coverage. Under normal circumstances, pre-Covid-19, we would reduce risky hobbies or sports activities (such as skydiving or deep sea diving). But right now, maintaining a healthy weight, quitting (or not starting) cigarette smoking, and adding regular exercise, will go a long way to place you into more preferred life insurance risk categories.

These life changes can have a significant impact on your premiums, because the healthier you are, the more likely you are to qualify for the best rates.

Budgeting, evaluating your expenses, and controlling your spending— all are going to play an important role in making life insurance more affordable. With the impact of COVID-19 on the economy, consumer spending is already at an all-time low. Eating at restaurants, luxury shopping, and travel are off the table, so how can you improve your finances from home?

Some things you can do include reducing nonessential monthly expenses (canceling gym memberships you won’t be using right now or eliminating pricey cable TV packages) will help. With all the cheap or free streaming services available, you won’t even have to give up your Netflix and Hulu binging. Other tangible expense reduction moves you can make include paying off high-interest debt (such as credit card or car debt). It’s all about prioritizing and creating a budget where eliminating unnecessary debt and expenses can help you factor in the cost of important life insurance coverage.

Why It’s Worth It

Even if you think you can’t afford life insurance, there are still many reasons why it could be the right choice for you. The 2019 Barometer study by LIMRA found that over 40% of American adults do not have some form of life insurance. Often, people are intimidated by the process of life insurance, and have misconceptions about how much it costs. Calculate the price you pay against the value of the financial resources you will provide for your family in the economic wake of your death.

How LifeQuote Can Help

These are sobering times, with health experts predicting that the situation will continue to worsen over the next several weeks or even months. None of us knows what the future will bring in these uncharted waters. Life insurance can provide the calm we need right now. Learn more about the life insurance policies that are best for you at LifeQuote with the many top-rated companies we represent. We have a variety of life insurance policies, including term and permanent insurance, which our experienced, licensed agents will help decipher and find the one you can afford. Contact us today and get a free quote to take back control of your life and of your family’s future.