How can inflation affect life insurance policies over time?

Inflation can erode the purchasing power of the death benefit associated with life insurance policies. As the cost of living increases over time, the value of money diminishes, meaning that the fixed amount provided by a life insurance policy may not hold the same value in the future as it does today. For example, if a policyholder has a death benefit of $100,000, inflation might mean that, years later, this amount would not be sufficient to cover the same needs or expenses that it would have covered at the time the policy was issued. Therefore, while the nominal value of the death benefit remains the same, its real value decreases due to inflation. This highlights the importance of considering inflation when planning for long-term financial needs and the potential necessity of choosing policies or riders that offer inflation protection.