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Life insurance when times are financially tough
Posted on 9 June 2014
In tough economic times, many households are forced to cut down on expenses. Salary cuts and job losses are often the main contributors. Months of unemployment can be highly stressful for families who are forced to drastically tighten their belts and decide what they must go without.
If placed in the position where you needed to decide if you can afford to keep your life insurance policy, it’s important to think about why you got it in the first place. Most likely, you took up a policy so that in the event of your sudden departure the loved ones you leave behind would be looked after financially. The payout could cover a funeral, mortgage payments, and any other ongoing costs that your loved ones might otherwise struggle to pay. If you’re already having a tough time paying for your expenses now, think about how tough it would be on your family if you weren’t there.
Always cover the basics
Fortunately, you have options. You can ask your insurance company to reduce your current cover level, dropping your premiums and making payments more manageable. A good place to start could be reducing your cover so it only includes the basics. The cost of your mortgage, funeral and a small buffer of 6 months worth of living expenses could be all you need temporarily. Your payments will be more manageable and your family won’t be left with any immediate outstanding expenses should you pass away. You may find that this basic cover works better for you and choose to keep your insurance at this level. Or, alternatively, you can increase your cover level again (keep in mind that you may need to be re-underwritten) when you’re more financially stable to include cover for other costs such as long term living expenses for your family, your children’s education or a donation to your favourite charity.
You could also check with your insurance provider whether they offer a temporary premium holiday in cases of financial hardship. AA Life offers a premium holiday benefit under their Funeral Cover product for up to 6 months. There are conditions around this, so make sure you contact your insurance provider to see if this option is available to you.
It’s important to know you have options with your life insurance policy. Think about what suits you in your current financial situation and amend your cover and premium accordingly. Because in the end, you want to make sure your loved ones are looked after no matter what.