In an era marked by economic uncertainty and the rising costs of living, it becomes increasingly crucial to safeguard the financial well-being of our loved ones. Life insurance serves as a vital tool in providing financial security and peace of mind during the ongoing cost of living crisis.
In this blog, we will explore the importance of life insurance amidst these challenging times and how it can protect your family’s future.
Key Takeaways
- The cost of living crisis is affecting people’s ability to afford life insurance. With the rising cost of living, many people are struggling to make ends meet and may not have the extra money to pay for life insurance premiums.
- According to a recent survey by the Association of British Insurers (ABI), 7% of survey participants reduced their insurance protection in the 3 months before January 2023 due to the pressures arising from the cost of living crisis.
- There are several ways that you can reduce the cost of life insurance, one of them being to get “Better Cover, Longer” for a changing world from Assura Protect.
The cost of living crisis refers to the situation where the expenses necessary for basic needs, such as housing, healthcare, education, and groceries, rise significantly while income growth fails to keep pace. This imbalance creates financial strain for individuals and families, making it harder to meet their everyday needs and build a secure future.
What’s causing the cost of living crisis?
Inflation is a normal part of modern life. Prices increase over time, but so do salaries, helping to balance out the cost of living. However, by the end of 2022, inflation had risen to 11.1%, the highest in over 40 years. Despite a slight drop to 10.1% in January 2023, average incomes have not caught up, leaving many families struggling to make ends meet.
What’s behind this? Energy costs. Since the pandemic, demand for oil and gas has increased while supplies have been limited due to the war in Ukraine. This has driven up energy prices, affecting other markets as well. As a result, families across the UK are feeling the pinch. How has this affected the UK Life Insurance industry?
How is the Cost of Living Crisis affecting Life Insurance?
The cost of living crisis is affecting people’s ability to afford life insurance. With the rising cost of living, many people are struggling to make ends meet and may not have the extra money to pay for life insurance premiums. In addition, some people may be forced to choose between paying for life insurance and other essential expenses like food and housing.
According to a recent survey by the Association of British Insurers (ABI), 7% of survey participants reduced their insurance protection in the 3 months before January 2023 due to the financial pressures arising from the cost of living crisis. This suggests that many people are finding it difficult to afford life insurance in the current economic climate.
Of those who have cut back on their insurance provision, 43% chose to completely cancel certain policies. Increasing numbers of insurance customers risk having underfunded loses in their professional and personal lives as the cost of living crisis continues.
Life Insurance acts as a safety net
Life insurance acts as a safety net, helping individuals mitigate the financial risks associated with the cost of living crisis. It can play a crucial role in protecting your loved ones by:
- Replacing Lost Income: If the primary earner of a household passes away unexpectedly, the financial burden on the surviving family members can be overwhelming. Life insurance can provide a lump sum payment, known as a death benefit, which can replace the lost income and help maintain the family’s standard of living. It can cover expenses like mortgage payments, utility bills, education costs, and other essential needs.
- Covering Debt and Liabilities: In today’s world, many families carry various debts, such as mortgages, car loans, and credit card balances. If the policyholder were to pass away, life insurance can help cover these outstanding debts, preventing them from becoming a burden on the surviving family members. It ensures that loved ones are not left grappling with financial obligations during an already difficult time.
- Funding Future Expenses: Life insurance can also serve as a means to fund future expenses, such as children’s education or retirement for the surviving spouse. By planning ahead and securing an adequate life insurance policy, individuals can ensure their loved ones have the necessary financial resources to pursue their dreams and maintain a comfortable lifestyle.
It is important to note that life insurance is still a vital investment for many people though, especially those with dependents who rely on them financially. A life insurance policy can provide financial security should you pass away during tough economic times, such as during the current cost of living crisis. Without a life insurance policy, your family could struggle to pay for your funeral, the mortgage, outstanding bills, and any other debts that exist if you were the primary earner for your family. Life insurance doesn’t have to be expensive though.
How to reduce the cost of Life Insurance during the cost of living crisis
There are several ways that you can reduce the cost of life insurance, namely:
- Choose a Term Life Insurance policy. When compared with Whole Life Insurance policies, Term Life Insurance policies are generally less expensive as they provide cover for a specific period as opposed to your entire life, therefore keeping premiums lower. Policies can also be tailored to your specific needs and financial goals. This flexibility can help keep your costs down during a cost of living crisis.
- Shop around for the best rates. Different insurance companies offer different rates and rewards for the same life insurance coverage so ensure that you get quotes from several providers.
- Adopt a healthier lifestyle. Ensuring that you lead a healthy lifestyle and being able to prove this to life insurance companies may help reduce your premium.
- Don’t take out less life insurance cover than your family requires to keep the cost down. Buying a policy without enough cover will ensure that your family is not financially protected.
Conclusion
As the cost of living crisis continues to affect households worldwide, life insurance emerges as a vital tool to protect your loved ones from the financial uncertainties it brings. By securing the right life insurance policy, you can ensure that your family is shielded from the burden of debt, loss of income, and unexpected expenses. Taking the time to evaluate your needs, explore policy options, and seek professional advice will enable you to make an informed decision that safeguards your family’s future in these uncertain times.
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See how Dividend Life Cover, Benefits & Premiums compare to national U.K. life insurers and get a complimentary quote.
