Make the necessary updates before you need them (when it’s too late).
When Jill and John purchased their life insurance policies ten years ago, they based their coverage on their anticipated obligations and needs. They made policy decisions, considering 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 quite simple – inflation.
Because inflation affects future purchasing power, it also impacts 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.
Until recently, it seemed that many people who bought their homes lived in them for most of their lives. Today, Americans are increasingly mobile. The dynamics of family finances have been altered by changing employment opportunities, the work-from-home movement, and dual incomes.
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%.
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.
Shopping at the grocery store…pizza on Friday nights…taking your children to the movies… filling up the 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 impacted too. You are potentially shortchanging your family’s future by basing your life insurance needs on your current income and today’s cost of goods and services. Be sure to account for increases in the cost of living as you insure your family’s current and future financial security.
Determining your current life insurance needs is one thing. But, figuring out how much coverage you’ll need in the future requires to pay careful attention to inflation and how it can affect your lifestyle.
Regular reviews of insurance coverage can help you keep pace with inflation and your changing needs. Make the necessary updates before you need them.
Every situation is unique, be sure to consult a professional before taking action. Contact Popular’s Retirement Center at firstname.lastname@example.org. If you have a 401(k) plan with Popular, remember that you can count on our group of experts at TeleBanco Popular® to guide you on matters related to your retirement plan. Call us at 787-724-3657 (press option 2 three times).
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