iQuanti: Permanent life insurance provides lifelong coverage. When you pass away, your beneficiaries receive a large death benefit, offering them significant financial resources to replace your income and pay off debts.
But keep in mind that inflation can eat away at your death benefit every year by reducing the value of the funds it pays out. With inflation at all-time highs, you'll need a way to keep your death benefit ahead of it. This article will discuss planning for inflation with your permanent life insurance by getting an inflation rider.
What is an inflation rider?
Riders let you customize your policy to provide additional, specific types of coverage based on your needs. An inflation rider increases your death benefit by a fixed percentage each year. In exchange, you pay slightly higher premiums. You can customize how much you want the death benefit to increase each year in many cases. The higher the percentage you select, the higher your premiums, but the more your beneficiaries can receive in the event of your passing.
Benefits of inflation riders
Inflation riders offer you several benefits for your permanent life insurance policy:
Protect your death benefit from inflation
Your death benefit might pay out the same amount of money, but that money becomes worth less each year due to inflation. As a result, your beneficiaries may not be able to cover as many of their needs when you pass away. An inflation rider can solve that by increasing the death benefit to keep up with or beat inflation, helping your beneficiaries maintain the same standard of living if you pass away.
Inflation riders don't cost that much to add to your policy relative to the inflation protection you receive. For instance, if you have a 5% inflation rider and a $500,000 death benefit, your death benefit will increase to $525,000 next year. It compounds, too. In the second year, you'll add 5% to $525,000, boosting the death benefit to $551,250.
Several options available
Inflation riders come in several sizes. You can purchase a smaller rider if inflation's low and want to save money or spend extra for a larger rider that increases your death benefit faster.
Can use this rider to grow death benefit faster than inflation
When inflation is low, you can still get an inflation rider and potentially grow your death benefit faster than inflation. This essentially gives you an easy, guaranteed way to earn a return on your investment in the policy separate from the cash value component. Plus, if inflation starts to rise in the future, you're already prepared with a higher death benefit and a rider that increases it every year.
Mitigate inflation with a life insurance inflation rider
Watching inflation eat away the value of your death benefit can be concerning, but an inflation rider can fix that. It'll help you reduce or eliminate the effects of inflation, ensuring your beneficiaries receive as much value as possible. Since there are so many options available, you could even get a larger rider and outpace inflation. You can also get many of these benefits for a relatively low cost.
That said, it's important to shop around for quotes from multiple insurers for permanent policies with inflation riders. Some may have lower premiums or better inflation rider options available, and getting multiple quotes can help you beat inflation for the best rate.
Press Release Service by Newswire.com
Original Source: How to Plan for Inflation When Getting Permanent Life Insurance