Most people who have life insurance coverage know the importance of life insurance, it is the reason that they bought it in the first place. Life insurance in its purest form is basically cash benefit redemption upon the death of the insured person. The problem is that over the years the premium payment that you have to do every month or year can be quite tiresome, some even learning to resent them as they drain much needed cash from us every month.
When the recession comes and we know that money is not so easy to come by any longer. We will immediately start to look at the different expenses that we have every month and look to trimming some that might not be very necessary. It is at this stage that many families think that they can think about dropping their life insurance coverage to save a few dollars a few months. A news agency even reported that the number of people who cancelled their life insurance products over the last year (2008) increased by over 20%.
It is however in our view that life insurance coverage should be one of the last things that you consider dropping just to save a few dollars. The “cost” of you dropping your coverage means you are foregoing many hundreds of thousands of dollars at the end of your life to help the rest of your family. It is easy to forget why you opted to get life or term insurance to begin with, but if you weight up all your expenses versus the benefits that easy gets you, you will actually find that dropping your coverage is a very bad idea indeed.
In valuing life insurance, you can’t look at it at the individual’s standpoint. You have to value it by looking at it from the family’s perspective. You have to ask yourself the question, will my family be financially O.K if you’re no longer in the picture; Most of the time the answer will be no. If that is the case then you know that your life insurance coverage is of vital importance. You simply can’t afford not to have life insurance coverage and leave your family in that situation if you die.
Another problem that life insurance products have is how people will wrongly judge the benefit of life insurance over the wrong period. A great example would again be to contrast the recession against the cost of maintaining life insurance by paying a monthly premium charge. The recession is a relatively short to medium term problem. It might seem bad now but it will improve somewhat in the near future. The life insurance coverage however is on the extreme of long term as it will only pay out when you die. If you cut off you life insurance payments due to the recession then you are foregoing a huge long term payment for the short term savings of a few dollars a month. I does should rather stupid doesn’t it?
When looking for things to cut back on there are a million and one other expenses that you can choose instead of your life insurance coverage. The first and most obvious would be to look at any extra extravagances that you might have or “lifestyle” things that you may have signed up for. The most obvious would be magazines that you hardly read anymore, or even television channels that you hardly watch. You can even start to control what you eat and choose cheaper weekly restaurant to visit.
You probably already know that life insurance coverage is very important. You know that you do it for your family and not yourself. This fact can however be lost in all the noise about the current recession and how all of us have to cut back. Life insurance coverage should almost never be dropped unless you really have no other expense items that you can save on. The benefits that you are foregoing are almost always too big.
Tags: Finance, insurance, Insurers, life insurance