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Actions Debt: You Can’t Take It With You
According to a recent survey more Americans are dying with debt than ever before.
In fact, 73% of consumers had outstanding debt when they passed away*. Those consumers carried an average total balance of $61,554, including mortgage debt. Without home loans, the average balance was $12,875*.
So what happens when you die in debt?
Unfortunately, your debt doesn’t go away
Your debt becomes part of your “estate,” or what you leave behind. So in addition to inheriting your possessions, your family or loved ones will also inherit your debt. And there could be a lot. Think about all of the potential sources of debt:
- Credit cards
- Mortgage
- Lines of credit
- Student loans
- Car loans
Protecting those you leave behind
Certainly, the best practice is to not have debt. But if you do, the death benefit from a life insurance policy can help your loved ones handle your debt after you pass away.
Options for affordable coverage
In general, there are two types of life insurance you can choose from:
- Universal, or “permanent” life insurance, which can be pricey, but can last your entire life as long as your premiums are paid.
- Term life insurance, which is insurance that you purchase for specific periods of time, or “terms.” Term insurance tends to be more affordable than universal.
You can buy either type of life insurance policies on your own, but depending on a variety of factors such as your age, lifestyle, and line of work, it could be costly. A more affordable option could be to purchase it through your employer, union, or professional association, many of which offer term life insurance at discounted group rates.
Bottom Line
While it’s important to live for today, it makes sense to plan for tomorrow. It’s wise to have at least enough life insurance to settle any potential outstanding debt and handle your final expenses. It’ll be hard enough for your loved ones to move on without you, don’t make it more difficult by leaving them to pay your tab.
*Source: Experian, December 2016
John Renz is a writer focusing on topics related to finance and insurance. He’s also a husband, father, brother, uncle, and son, but doesn’t really make much money at those jobs.
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