Planning for life insurance during financial uncertainty

In times of financial uncertainty, it’s common to feel stressed and overwhelmed by the rising costs of living. Inflation, higher prices, and the challenge of sticking to a budget can make it harder to focus on long-term financial goals. Many people may find it difficult to think beyond immediate concerns when the future feels so unpredictable. However, during periods of financial strain, life insurance can be a helpful tool. Contrary to common life insurance myths, having coverage can offer protection to your loved ones. While it may seem like an unnecessary expense when money is tight, there are budget-friendly life insurance policies that can offer affordable coverage options and valuable financial protection without breaking the bank.

Life insurance myth: A policy only makes sense in times of financial security

One of the most common life insurance myths is that having coverage is only necessary when times are financially stable. In reality, life insurance shouldn’t be an afterthought that is addressed only when the economy is flourishing. Adding coverage to an overall financial plan can provide a safety net for both you and your loved ones and help ensure that even during periods of financial uncertainty, there will be lifeline for loved ones if the unexpected happens. Instead of waiting for ideal financial conditions, consider life insurance as a proactive way to help safeguard the future.

Why life insurance matters when there’s financial uncertainty

Life insurance can offer several benefits and be a powerful tool to help provide greater financial stability and long-term protection. This is especially true for younger generations, who may face even more financial uncertainty in the years ahead. Having life insurance in place can help ease that burden by protecting assets and creating a safety net for the future.

If a family is still dependent on someone’s income, the loss of that financial support can be devastating. Life insurance helps ensure loved ones can manage ongoing expenses like housing, education, and daily living costs. Depending on the type of policy chosen—term or permanent—some plans may offer added benefits, such as a cash value component. This feature may allow the insured to access funds while they’re still alive and help them cover unexpected expenses or get extra financial support in times of hardship.

How to use life insurance as a financial tool

Some permanent life insurance policies build cash value and can be accessed by withdrawing funds, taking out a loan, or using it as collateral for a loan.¹ Certain policies also offer accelerated benefits for qualifying events and can be used for bills, making up for missed work due to an illness, family vacations, or in any other way you choose.² Along with offering financial relief for loved ones during a difficult time, life insurance can also support long-term financial goals and offer greater peace of mind for the future.

Life insurance planning for retirement

Along with providing a death benefit to loved ones, life insurance can also be a valuable part of a well-rounded retirement income strategy. Permanent life insurance with a cash value component can allow money to grow tax-deferred, offers flexibility through withdrawals or policy loans, and may provide access to funds when needed. This can provide a source of supplemental income in retirement and can help you manage unexpected expenses without having to tap into other retirement assets.

How to plan and budget for life insurance

To plan for your life insurance needs, begin by assessing your family’s financial obligations, identifying beneficiaries, and estimating how much income a policy should help replace. Taking time to explore your options and what coverage typically costs can help you overcome common life insurance myths. Nearly three-quarters of Americans overestimate the true cost of a basic term life insurance policy and may avoid getting much-needed financial protection because of this misunderstanding. Even a small amount of coverage that can help with final expenses or outstanding debt is better than not having any protection at all. There are a wide range of policy types and coverage levels available, so it can be easier than you might think to find life insurance that fits within their budget.

What is the least expensive form of life insurance?

Term life insurance is generally the least expensive type of coverage. It provides protection for a set period—typically 10, 20, or 30 years—and pays a death benefit if the insured passes away during that timeframe. Compared to permanent life insurance, term policies have lower premiums because they don’t include cash value or lifelong coverage. A term policy can be a smart choice for individuals looking for affordable, straightforward coverage, especially during high-expense years like raising children or paying a mortgage. Many term policies also offer the option to convert to permanent coverage later on, so it can be a practical starting point for getting coverage in place. Working with a financial professional can help determine what type of life insurance is right for you based on your family’s needs and long-term goals.

Feel confident during times of financial uncertainty

One way to prepare for the unexpected is with a proactive approach. By exploring life insurance, annuities, and other financial products and building a comprehensive financial plan, you can help create a stronger foundation for the future. While the economy may shift and circumstances can change, having the right protection in place can help boost confidence that you and your loved ones are supported, no matter what twists and turns may lie ahead. Ready to explore your option? Visit Midland National’s find an agent page to find a financial professional near you.

1. Policy loans from life insurance policies generally are not subject to income tax, provided the contract is not a Modified Endowment Contract (MEC), as defined by Section 7702A of the Internal Revenue Code. A policy loan or withdrawal from a life insurance policy that is a MEC is taxable upon receipt to the extent cash value of the contract exceeds premium paid. Distributions from MECs are subject to federal income tax to the extent of the gain in the policy and taxable distributions are subject to a 10% additional tax prior to age 59½, with certain exceptions. Policy loans and withdrawals will reduce cash value and death benefit. Policy loans are subject to interest charges. Consult with and rely on your tax advisor or attorney on your specific situation. Income and growth on accumulated cash values is generally taxable only upon withdrawal. Adverse tax consequences may result if withdrawals exceed premiums paid into the policy. Withdrawals or surrenders made during a Surrender Charge period will be subject to withdrawal charges, processing fees, or surrender charges, and may reduce the ultimate death benefit and cash value. Surrender charges vary by product, issue age, sex, underwriting class, and policy year.

2. Subject to eligibility requirements. The death benefit will be reduced by the amount of the death benefit accelerated. Since benefits are paid prior to death, a discount will be applied to the death benefit accelerated. As a result, the actual amount received will be less than the amount of the death benefit accelerated. An administrative fee is required at time of election.

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