Recession-Proofing Your Life Insurance

This is a guest post from Joe Taylor Jr. Taylor is an internal business consultant for a Fortune 500 company, who also writes about finance, culture, and design. He holds a Bachelor of Science in Communications from Ithaca College.

I remember an evening a few years ago, when the company I helped start had to close its doors. I'd sunk my entire savings into building a business that had thrived. As soon as bombs started falling on Baghdad in 2003, however, my largest client cancelled its contract and two other big customers totally shut down. Of course, my creditors didn't care about the reasons I hadn't been receiving payments on invoices we'd sent. They just wanted to get paid themselves.

My wife and I ran down the list of changes we'd have to make: downsize to a smaller home, cut the cord on cable television, maybe even cancel my life insurance policy. While we had to cut plenty of budget items to the bone, I kept scraping together a few bucks every week to keep paying that term life policy. After all, I joked at the time, it meant that I was at least worth more dead than alive.

Staying the course through tough times
Those were scary times. I'm in good financial shape now, but the recent economic downturn has many of my friends in the same place I was that night. For most Americans, the cost of maintaining a term life insurance policy amounts to the same price as a meal for two at a casual restaurant, maybe less. And it's easy to consider dropping life insurance when you've been laid off or you're facing another kind of money crisis. It's not like things can get any worse, right?

In fact, they can.

Economists from Columbia University and the U.S. Federal Reserve examined death statistics and found that laid-off workers face a higher mortality rate than colleagues who remain steadily employed. Over twenty years following mass layoffs, discharged workers were, in many cases, up to twenty percent more likely to suffer medical or mental problems that led to their deaths.

Why staying current on term life insurance saves money
Of course, if your life insurance is tied to your job, you typically need to establish a new policy. Many financial advisors urge clients to maintain a term life insurance policy in addition to coverage offered as an employment benefit. This way, you can maintain coverage and enjoy consistently low monthly premiums. In addition, you won't have to subject yourself to new exams when you change jobs.

I've been able to supplement my term life coverage with employer-provided insurance over the past few years, secure that my primary policy can care for my loved ones regardless of my employment status.

Getting healthy can help cut life insurance costs
I'd like to say that I kept the same insurance provider throughout the past decade. Instead, I made a switch when I learned more about how term life insurance providers rate risk. If you smoke, if you're overweight, or if you lead a sedentary lifestyle, you may feel more of a pinch when you pay your monthly premium. I've never smoked, but after my wife started dragging me to the gym a few times each week, I found a life insurance provider online who was able to shave ten dollars a month off my payment. It's a small reward for doing the things I should have been doing all along to take care of myself.

If you're thinking about canceling your life insurance, what are some other items in your household budget that might make more sense to cut? Are there ways you can kill two birds in one stone, by spending less on unhealthy items and keeping your premiums intact? Tell us about your challenges.

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