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- Life insurance is a contract between an insurer and you. The insurer promises to pay your beneficiary upon your death.
- Although it may seem morbid to talk about your money after your death, it is worth the effort.
- A financial planner suggests that private student loan borrowers and business owners obtain life insurance.
Life insuranceContract between a person or life insurance company. Life insurance company agrees to pay a beneficiary — typically someone’s family member — if the insured person dies. The contract details how much money your beneficiaries can receive.
Although it might seem strange to share such details with someone completely new at a life insurer company, financial planner Spencer BettsIt is worth investing in protection in the event of an unfortunate outcome.
He says that life insurance is very cheap for people between 40-60 because there’s a small chance you’ll die.
Betts suggests that there are four types people who need life insurance.
1. Private student loans are available to those who qualify
Federal student loansThese are discharged when the borrower dies. However, private student loan debtors may have different circumstances.
Private student loan debt you took out on your own may be discharged without issue — though not always, each lender’s policy will differ — but private student loan debt taken out with cosigners will be passed on to the cosigners if the loans were taken out before November 20, 2018. The following is a section of the Economic Growth, Regulatory Relief and Consumer Protection ActIf the loan was taken out on or after November 20, 2018, all cosigners must be released.
Life insurance policies provide protection for your student loan debt.
2. People who have cosigners to their debts
Betts states, “If you are single and have no dependents and you have $20,000 in car loans, the automobile company may repossess your vehicle, but they won’t pursue any other family member because you weren’t cosigned.” Cosigners, on the other hand, are responsible for repaying unpaid debts that have not been paid after a person’s death.
If someone is cosigning on a personal loan for you, then you will want to get a life insurance policy that covers that amount.
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3. Business owners who would like to pass on the family business to their kids
Betts says that life insurance is a great option for business owners who plan to leave their company to their children.
“If you are the sole owner of the company and you die, the business’s value could be subject to an order of creditors.” Estate tax. Life insurance might be required to offset the estate taxes if you wish to continue your family’s business, farm, and other similar activities.
Betts says business partners can make agreements about how business assets will be divided, paid out, passed on, or passed down in the event of the death of one of their business partners.
He says that a buy-sell arrangement can be used to specify things such as, “If my business partner is killed, I will pay his family $1,000,000 or half the value of the business at the time of his passing.”
Your business partner can be the beneficiary of your life insurance policy. This ensures that your family has the financial support it needs.
4. Parents of children who have disabilities
Betts suggests that parents of children with special requirements should have life insurance in order to cover their childcare costs after they die.
Betts states, “This may be the greatest reason to have life insurance.” Life insurance is necessary if you have special needs children.
