Life insurance coverage and Inflation
Your income hasn’t decreased in recent times, but your savings have? Do not be too perturbed. There are many on the same boat. Inflation has created a hole in many pockets. General expenses, educational expenses and medical expenses have all sky rocketed. In addition, inflation will surely take a heavy toll on your life insurance coverage. The coverage that you thought was sufficient until yesterday becomes incomplete for the tomorrow to come.
Life insurance and inflation share a very delicate relationship. A lot of people ignore the fact that in the short run the life insurance policy might not be so severely hit by inflation as in the long run. The future value of money should be a very important consideration when selecting a life insurance policy. If you are choosing a short term life insurance policy then you could take a risk of ignoring inflation. However if you are opting for a term plan exceeding twenty years or perhaps a whole life insurance plan, then you must pay attention to inflation.
It neither takes a lot of time nor a lot of money to safeguard your investment against inflation. Inflation affects education and health sectors the most. So if your dependents include children or parents then you must consult your agent regarding the effects of inflation on your policy. After all, how would a diminished life insurance policy serve your purpose a decade down the line?
Assuming that an average income of $75,000 helps meet you family requirements, you must calculate an 8%-10% inflation rate for medical and educational expenses whereas a rate of 3%-4% should be enough for general expenses. Remember, you would not want to leave your family insecure and helpless because insufficient funds. Bring about alterations in your life insurance policy with immediate effect if you haven’t already included the inflation factor.