How Stock Market Impacts Your Life Insurance

Published by FrankNez Team.

Life insurance is a contract between an individual and an insurance policy provider.

Every life insurance policy is unique, as are the laws that govern insurance policies in each state.

Thus, before you purchase a life insurance policy, you must understand the factors that could affect you in the long run.

One factor that you might miss is the stock market.

When it comes to life insurance, most people think their policy is only affected by their circumstances.

However, the stock market can also greatly impact life insurance policies – both in terms of the premiums you pay and the payouts you receive.

Related: How to Invest in The Stock Market for Beginners

The Impact of the Stock Market on Permanent Life Insurance Policies

Permanent life insurance provides lifetime protection to the policyholder and commonly includes a cash value.

With permanent life insurance, you can access the policy’s cash value while you’re still alive.

However, you must consider that permanent life insurance is more expensive than term life insurance due to the length of its coverage, its cash value, and the policy fee.

But in general, it is safe to say that permanent life insurance is the best option you can get as long as you can afford it.

Aside from knowing what permanent life insurance can offer, it is also best that you understand how it behaves based on the market trend because insurance tends to fluctuate according to the market behavior depending on what policy you acquire.

Indexed universal life and variable universal life policies affect stock market movements most.

The traditional permanent policies have a cash value with a variable interest rate that can be predetermined yearly based on how the insurer performed the previous year, protecting it from market volatility.

The Impact of the Stock Market on Term Life Insurance Policies

When it comes to term life insurance, there is nothing you should be worried about.

Recent events play a much minor role in term life costs.

The price of term life insurance remains unchanged.

There is no reason not to apply now.

If you are worried about how the stock market impacts your life insurance, you should opt for term life insurance as a drop in the stock market only has a minimal impact on the policy.

However, unlike permanent life insurance coverage, term life insurance only covers you for a specific period.

Once your term expires, you can renew your policy, upgrade it to permanent life insurance or terminate your insurance policy.

You can choose a 10, 15, or 20-year term for your policy, which is no doubt a long time.

Moreover, this policy doesn’t have value other than a death benefit assurance.

It also lacks the saving element that you can find in whole-life insurance policies. 

The Impact of the Stock Market on Life Insurance Coverage

Stock market fluctuations can affect life insurance companies.

Any fluctuations in the stock market can either decrease or increase life insurance coverage.

However, steps can be taken to protect policyholders from the stock market’s volatility.

For example, federal guidelines for life insurance companies concerning reserves, ownership of sufficient stocks with fixed interest rates, and reinsurance are placed.

These steps are taken to mitigate the market downturn’s impact on policyholders’ insurance coverage.

Policyholders need not worry as they are protected by state legislatures and the NAIC or National Association of Insurance Commissioners regulations for market and finance.

It seeks to shield individuals from unjust pricing and secure their funds.

When purchasing insurance coverage, you can protect yourself more by researching the insurer’s financial status with credit bureaus.

In addition, reading life insurance reviews online could help you understand every life insurance company’s financial strength.

Is Life Insurance a Good Investment?

The stock market is constantly fluctuating.

Thus, expect it to correct itself in every market uptick and downturn.

Although it could affect your life insurance depending on the policy you purchase, it is still considered a good investment.

Discuss the market with your insurer, which many policyholders don’t do as they think it doesn’t impact their insurances.

However, the stock market is one of the vital things you should bring up with your insurance company and see how they can protect you from the market’s volatility.

Protect Your Life Insurance Coverage Against the Stock Market

Choosing a term life insurance policy is the best way not to be affected by the market’s volatility.

However, you should also consider whether the advantages you can get from term life insurance outweigh the disadvantages.

Meanwhile, if you acquire permanent life insurance, you can add protection guarantees to your Variable Universal Life (VUL) contract for an additional cost.

Find out how to increase life insurance coverage as plan B, like opting to buy a new insurance policy and ensuring that your family will be well taken care of when you are gone.

If your insurer and plan allow you to make adjustments to your current coverage, then you might want to consider that also.

Talk to your insurer and discuss that you want to boost your life insurance coverage.

And don’t hesitate to ask for suggestions.


In general, the stock market has a bigger impact on life insurance policies with cash values than on term life insurance policies.

That’s because the death benefit of a term life insurance policy is not affected by the stock market.

However, if you have a whole life insurance policy or another type of permanent life insurance policy with a cash value, the stock market can have a big impact on the value of your policy.

Talk to your life insurance agent or financial advisor if you’re concerned about the stock market’s impact on your policy.

They can help you understand how it works and make recommendations on protecting your policy from market fluctuations.

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