Life Insurance = Loan Protection

Life Insurance = Loan Protection

If you’ve got a mortgage or student loans, your loved ones could be left with debt to pay should something happen to you. You may have received lender offers for mortgage protection or credit life insurance, but these very specific policies often come with hefty price tags and may not be the best way to protect your family’s financial future.

According to the Consumer Financial Protection Bureau, over 90% of student loans are co-signed.

If you’re worried about the possibility of saddling your loved ones with debt, consider term life insurance. It’s generally a better alternative to those offered by lenders because rather than paying benefits directly to a lender, term life policies disburse insurance proceeds to your named beneficiaries who can then determine how the money is spent.

A term life insurance policy covers you for specific length of time—say 10 or 20 years. It can protect your loved ones from inheriting your debt in any number of situations:

• If you have a mortgage, experts recommend purchasing a term life insurance policy for at least the amount of your mortgage. If the unthinkable happens to you, your loved ones will receive the face value of the policy.
• If you share debt with another person (credit cards with your spouse, for example) a term life insurance policy can help provide that person with enough funds to pay off your collective debt.
• If you have a private student loan—or if you are a co-signer of such a loan—you should know that if something happens to the borrower, it’s generally up to the co-signer to continue the payments. So even if you are not the borrower, you may be on the hook even if you simply co-signed the loan. A life insurance policy on the borrower for the duration of the loan can provide funds to repay the loan should the borrower die. A $50,000 policy on a healthy 25-year old woman is less than $5 a month—an easy way to provide peace of mind to borrowers and their co-signers.

Term life insurance is a great way to protect anyone who co-signed a loan, credit card or mortgage with you.