The Impact of Inflation on Your Life Insurance Needs

Inflation erodes the purchasing power of money over time and directly impacts the real value of your life insurance policy's payout. A policy purchased today might not provide the same level of financial security to your beneficiaries in the future due to rising costs of living, healthcare, and education. Therefore, it's essential to consider inflation when determining the appropriate coverage limit. 

One strategy to mitigate the impact of inflation is to opt for a policy with an inflation protection rider. This rider ensures that the benefits increase over time, helping to maintain the real value of the death benefit. Some policies offer automatic benefit increases, while others guarantee the right to periodically increase benefit levels without requiring evidence of insurability. 

When evaluating life insurance options, it's crucial to compare policies with and without inflation protection. Consider the expected premium increases or additional premiums required to pay for automatic or optional benefit increases. While policies with inflation protection may have higher premiums, the long-term benefits of maintaining the real value of your coverage can outweigh the additional cost. 

Regularly review your life insurance needs and adjust your coverage as necessary to account for inflation and other life changes. Consult with a one of our life insurance agents to assess your specific situation and determine the most appropriate life insurance strategy to protect your family's financial future. 

Stephanie Ehman, CIC, CPRM, CISP, CPSR, is a risk consultant at Knight Insurance Group.