The Center for Economic and Policy Research believes that this year’s recession will cause at least 4.2 million people to lose their health and life insurance coverage. With the credit crunch taking hold and fears that it won’t be going away anytime soon-what should life insurance policyholders do to battle these difficult economic times? Furthermore what about those getting their first mortgage, what kind of policies should they take out when simply paying off the mortgage is paramount in their minds as opposed to life insurance. For existing policyholders, it would be prudent to switch to term-life insurance.

If you have a group policy, you most likely will lose your coverage if you lose your job. An individual term-life insurance policy has portable coverage and is usually less expensive and if you’re in good health, you can probably get more coverage.

You may want to think twice about Joint life policies. Joint life policies usually pay out on the death of the first policyholder, leaving the second person uninsured at an age when the premiums shoot up in price. Overall it will be dearer, but it's worth opening separate policies at the start.

Think about taking out a plan that pays out if you survive serious illness. Buying two separate policies means if you claim for a critical illness, you still have life cover in place. It's cheaper to combine the two and have a plan that pays out if you either suffer a critical illness or die, which is useful for covering a mortgage. If you have a personal pension it might look attractive to buy your term insurance at the same time, and benefit from tax relief in the same way your pension premiums do. But check this is the best option first, because it can sometimes be more expensive than buying the equivalent cover direct from an insurer.

Given these uncertain economic times, life insurance companies are most worried about their customer base being unable to keep up payments because of increasing living costs and other financial obligations, such as rising mortgage and credit repayments.

However, many experts stress that in times of economic uncertainty putting money aside for a rainy day is even more important than when the economy is booming. This is essential for life insurance which should be always considered one of the most important financial commitments of a consumer’s life, and so paying the monthly premium is essential. This may be a worry to life insurance companies as according to research by Plan Insure, they believe that due to the credit crunch fewer people are willing to part with the extra money it costs each month to have a life insurance plan in place.

The organisation also observed that there is also an increasing number of borrowers opting for basic life cover rather than full protection.Recent research from My Mortgage Direct found that only one in five borrowers are signing up for life assurance along with their new mortgage deal, with many blaming financial difficulties as the reason they have not taken out cover.