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Can the stock market influence your life insurance policy?
Can the stock market influence your life insurance policy? - Content - Left Column - Image
As the stock market fluctuates, most people keep an eye on their financial accounts to see how they’re affected. But have you ever wondered if the stock market can influence your life insurance policy?
In short, yes, depending on the type of policy you have. If you have a permanent life insurance policy, stock market trends may affect its cash value component. While your premiums won’t change, and the value of your account won’t depreciate, the interest rate can be affected by market forces. The impact on your cash value will also vary depending on the type of permanent policy you have. Let’s learn more about how the stock market may impact your life insurance policy.
How the Stock Market Affects Term vs. Permanent Policies
There are two main types of life insurance policies: permanent life insurance and term life insurance. Unlike permanent life insurance, term life insurance is only meant to last for a certain period of time, typically 10, 15, 20, 25 or 30 years. Term life insurance policies don’t have a cash value component, so they can’t be used as an investment tool in the same way permanent life insurance policies can. Therefore, they’ll remain unaffected by any stock market fluctuations. The impact of the stock market on your permanent life insurance policy will depend on the type of coverage you have: whole life, universal life or variable life.
  • Whole life insurance: The cash value of a whole life insurance policy won’t change according to the fluctuations of the stock market since it remains at a set value that the carrier and policyholder agreed upon when purchasing the policy.
  • Universal life insurance: Traditional universal life insurance policies have a minimum interest rate set by the insurance carrier, while indexed universal life insurance policies have variable interest rates that can fluctuate based on market activity.
  • Variable life insurance: The cash value of variable life insurance is entirely dependent on market activity. This type of permanent policy will be most significantly affected by stock market changes.
What other factors affect life insurance?
While the stock market can have an impact on the cash value of your permanent life insurance policy, it won’t affect your premiums. Those are determined by a variety of factors, including but not limited to:
  • Policy type (permanent life insurance vs. term life insurance)
  • Health
  • Lifestyle
  • Occupation
  • Gender
  • Age
While economic changes won’t affect what you pay for life insurance each month, they may prompt you to rethink your coverage. For example, during times of inflation, will the benefits from your current policy still be enough to support your family and replace your lost income? Evaluating your coverage during the ups and downs of the stock markets can help ensure you still have the best protection possible for your loved ones.
SelectQuote Can Answer Your Questions About the Stock Market and Life Insurance Rates
Making decisions about life insurance can be stressful if you’re unsure about stock market fluctuations and how they’ll affect your policy. At SelectQuote, we have nearly 40 years of experience helping individuals compare life insurance policies. Our licensed agents can ease the stress of shopping for life insurance by learning about your unique situation, then using proprietary technology to find you the right coverage in just minutes.
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