Why Do You Need Life Insurance During a Recession?
In this article, we will learn how having life insurance can help you during recessions
New Delhi (India), February 24: We have headed into 2023 with fears of recession clouding over the western world, due to a result of manifold economic factors. For now, India does not fall under the shadow of the recession cloud. But how would things turn out if recession hovered over India as well? By definition, a recession is a phase of a significant decline in economic activity that spans for several months, signalled by a drop in GDP in two consecutive quarters. Recessions lead to loss of jobs, reduced consumer spendings, and downturns in the housing and financial markets. So, in short, a recession is an undesirable phase economies go through. So, in this article, we will learn how having life insurance can help you during recessions.
Importance of a Life Insurance During Recessions
Life insurance is a financial tool that can help provide financial assistance to your family in the event of your untimely death. In a struggling economy, you may have to deal with plenty of hardships and mental stress. In such times, you want to ensure that your family will be able to sustain, in the event of some unprecedented, tragic event. For example, if you have an untimely death, unemployed dependents would have to look out for a job to sustain. However, during a recession, it may be very difficult to find employment.
Having life insurance can help in scenarios like these; at the same time, they are also useful during good times. Now let’s deep dive further and understand the specifics regarding how a life insurance policy will be helpful during a recession.
Provides financial safety: In the worst of cases, i.e, untimely deaths, having a life insurance policy could provide substantial financial assistance and security. If your dependents have to claim the life insurance, the life insurance can help you cover the cost of your funeral, help purchase essentials, and pay off bills in the future. This includes daily expenses like food rent, utilities, and groceries and additional expenses like medical expenses or tuition costs. So, consider purchasing a life insurance policy early in your life, when you are healthy. That is because insurance policies are more affordable if you are young and healthy.
Helps pay debts: Everyone at some point of their life takes some kind of debt to achieve various life goals. For example, you take on debt in the form of a home loan to purchase a house; or, you may take a car loan to buy a car. The thing is in the event of an unfortunate event, you wouldn’t want your family members or dependants to shoulder your debt obligations. A term life insurance policy can aid your family members to continue making those loan payments in the event of your untimely demise. A good life insurance policy can help your family from losing the house or the car.
This is even more crucial in the event that you are the main income earner in your family or if the family has difficulties surviving with no other incomes. This type of protection is vital during a time of recession in which several family members could be in a jobless situation, or if the family income is less than normal.
Helps in diversification: During recessions popular investments vehicles like stocks and real estate tend to perform poorly; the value of stocks and real estate fall. So, you would not get the best return on your investment if you had to sell your assets when they are performing poorly.
However, life insurance could be a great way to offset the financial burden in the bear market. If you are covered by a life insurance policy, the beneficiaries will receive a payout upon your death, and unlike your investments, the amount paid by the insurance company will remain constant, regardless of whether a recession is hovering over. So, even if the investment portfolio is performing poorly, your family will be supported by the life insurance policy.
So, in conclusion, life insurance policies can be very helpful to aid your family during a recession, in the event of your untimely death. At the same time, during recessions life insurance companies might be more competitive in their rates in order to draw new customers. This could be a chance to get life insurance with a lower price. If you take advantage of the lower rates it is possible to ensure your family members are protected without spending a fortune. If you have family members that depend upon you, a life insurance policy with reliable insurance companies like Aditya Birla Sun Life Insurance is worth considering as part of your financial plan.
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