Article

Inflation Impacts Your Insurance Coverage Too

Inflation Impacts Your Insurance Coverage Too

Inflation is making the news with soaring rates that haven’t been seen in 40 years. Because inflation affects future purchasing power, it also affects future life insurance needs and your family’s financial security. Make the necessary updates before you need them, when it’s too late. Read here about coverages you should consider.

April 25, 2022
Inflation Impacts Your Insurance Coverage Too
Important Disclosure: Content on our website and in our newsletters is for informational purposes only. The information provided may (or may not) directly apply to your situation. We recommend that readers work directly with a professional advisor when making decisions in the context of their specific situation.

When Jill and John Smith purchased their life insurance policies ten years ago, they based their coverage on their anticipated obligations and needs. They made policy decisions, taking into account the mortgage on their home, projected college education costs, and living expenses. Well, that was then – and this is now.

Recently, the Smiths reevaluated their insurance needs and were surprised to discover their insurance coverage was inadequate. How could this be? The answer is really quite simple – inflation.

Because inflation affects future purchasing power, it also affects future life insurance needs. For couples like the Smiths, inflation means that life insurance coverage, which may have been adequate several years ago, may no longer be sufficient. With this in mind, consider three of the more common life insurance needs that may be affected by inflation.

Mortgage Obligations

Until recently, it seemed that many people who bought their homes lived in them for most of their lives. Today, Americans are increasingly mobile. Changing employment opportunities, the work-from-home movement, along with dual incomes, have altered the dynamics of family finances.

In many cases, a growing family may now be able to afford to pay a mortgage on a lot more “house” than at any time in the past. Does this trend minimize the reality of inflation and the rising costs of homeownership? Not at all.

The fact is, escalating real estate prices have translated into larger mortgage loans. Therefore, if you have recently purchased a home, you may need to consider increasing your life insurance to help cover your new mortgage.

College Education Costs

If you are planning on sending your children to college, you are probably concerned about the escalating costs of higher education. And, rightfully so.

The average cost of college in the United States is $35,720 per student per year. The cost has tripled in 20 years, with an annual growth rate of 6.8%. The average in-state student attending a public 4-year institution spends $25,615 for one academic year.

To be prepared, factor inflation into your college savings strategies. Make sure you have adequate life insurance to help provide financial protection in the event of an untimely death, and consider increasing your coverage so that it best reflects the future cost of education.

Daily Expenses

Shopping at the grocery store. . .pizza on Friday nights. . .taking your children to the movies. . .filling up your gas tank. . .purchasing a new car. Over the course of time, the costs associated with these necessities and “treats” of everyday life are affected by inflation.

As a result, your family’s future lifestyle could be affected too. By basing your life insurance needs on your current income and today’s cost of goods and services, you are potentially shortchanging your family’s future. Be sure to account for increases in the cost of living as you insure your family’s current and future financial security.

Future Projections

Determining your current life insurance needs is one thing. But, figuring out how much coverage you’ll need in the future requires you to pay careful attention to inflation and how it can affect your lifestyle.

Regular reviews of your insurance coverage can help you keep pace with inflation and your changing needs. Make the necessary updates before you need them.

Other content you may like

  • How COVID Might Forever Change Benefit Plans

    How COVID Might Forever Change Benefit Plans

    July 10, 2021
    With the pandemic disrupting businesses, employers recognize that benefit plans need to adapt to compete for and retain the best talent. Companies of all sizes are likely to see lots of permanent changes. This article examines a few trends to watch this year and next.
    Read this Article
  • Big Names are Driving Stock Performance

    Big Names are Driving Stock Performance

    June 13, 2023
    The Strong Valley advisor team, Kyle, Jason, Chris and Adam, discuss the top 8 performing stocks and their contribution to S&P 500 returns YTD, as well as the flip flop of what did bad vs what did good. They also delve into the extraordinary measures to be exhausted with the debt ceiling limit and much more economic overview. Answers to Top Questions from clients: What’s the impact of more bank collapses? What should we be changing right now?
    Read this Article
  • Becoming a Better Negotiator

    Becoming a Better Negotiator

    May 20, 2023
    Whether closing a sale, haggling over a price with a supplier, or discussing a raise with an employee – business owners negotiate nearly every day. Whether you are a beginner or a confident negotiator, these strategies can help you maximize your negotiating skills and improve your chances of building your business.
    Read this Article
  • Is The University of Michigan Consumer Sentiment Too Pessimistic?

    April 15, 2025
    What is happening with the latest economic data? Both the hard and soft data have been softening. Do you know the difference? What does this mean for our economic outlook at home? Let’s take a look at the GDP, inflation and durable goods, as well as consumer sentiment.
    Read this Article
  • The link you have selected is located on another server. The linked site contains information that has been created, published, maintained, or otherwise posted by institutions or organizations independent of this organization. We do not endorse, approve, certify, or control any linked websites, their sponsors, or any of their policies, activities, products, or services. We do not assume responsibility for the accuracy, completeness, or timeliness of the information contained therein. Visitors to any linked websites should not use or rely on the information contained therein until they have consulted with an independent financial professional. Please click “Continue to Link” to leave this website and proceed to the selected site.
    phone-handset