LifePolicyFactsYes. A life insurance payout is usually a fixed number, while prices rise. The amount stays the same on paper, but what it buys becomes smaller each year.
How inflation works on a payout
If prices rise 3 percent a year, something that costs 100 today costs about 181 in 20 years. A 500,000 policy bought today would then have the buying power of roughly 277,000 in today's money.
What 20 years can do
| Inflation rate | Value of 500,000 in 20 years (today's money) |
|---|---|
| 2% | about 336,000 |
| 3% | about 277,000 |
| 4% | about 228,000 |
These are calculations, not forecasts. Try your own cover and rate in the Inflation Impact Calculator.
Ways to protect cover
Buy slightly more than today's figure, choose a policy with an indexation option if one is offered, or add a second policy later. Reviewing your needs every few years also helps; see how much you need. Remember that your debts, such as a fixed mortgage, do not grow with inflation, so the effect differs for each family.
Frequently asked questions
Do all policies lose value?
Level fixed-amount policies do. Indexed ones increase the cover but cost more.
Is it better to buy more now?
Often yes, if the premium fits your budget.
Educational content only. Not insurance, financial or legal advice. Figures are illustrations; check real quotes and policy documents.