One without the other could leave your loved ones at risk
No one wants to think about dying prematurely, but you may wish to discuss it if you have large private student loans. Taking out a life insurance policy for the student with the loan will protect parents or beneficiaries from inheriting a huge unexpected debt should tragedy strike.
Here are some basic facts to consider about how and why life insurance and student loans should potentially go hand in hand.
Death Discharge – Under such circumstances, the borrower’s estate is released from liability when dealing with federal student loans, but that may or may not be the case with private loans. Loan documents’ fine print will detail the protocol should you or your co-signer pass away before loans are paid off. Private lending giants Sallie Mae, Wells Fargo and Discover offer this service, but not all others do. If your lender is one that does not, it is strongly recommended to look into life insurance.
Similarly, life insurance for your co-signer is suggested, as well. Furthermore, if you don’t have a co-signer but are married, your spouse is likely to inherit your student loan debt should you pass on unexpectedly. That is, of course, unless your lender offers death discharge or you have life insurance.
Protecting Assets – Student loan blog site Tuition.io recommends estimating what your estate might amount to in the event of your passing before looking into or dismissing life insurance.
“Creditors can apply to your estate for payment, but if you don’t have any assets, you may not have much of an estate,” Tuition.io reads. “If you don’t have a cosigner or spouse to protect and any estate will go to your parents or someone else, it may not be a big deal. If you do have significant assets you want to protect or want to be able to leave something behind, insurance is smart.”
Types of Insurance – There are many different types of insurance, so make sure to be specific when researching details. The type you’re looking for in this case is term life insurance because you can set the length of the coverage to any given term. You would want the term to run for the same amount you likely have left on your student loans and for about the same amount on the loan balances. For best results, talk to a professional broker, but anyone can ‘try and check’ with the premiums to find your most manageable rate. Websites like InsuranceQuotes.com compile results from many top-rated insurers to help with your comparison shopping.
Your unexpected death would be a lot for your family to handle already; do you want them to have to worry about paying back tens to hundreds of thousands of student loans on top of it all? Helping ease that potential burden could cost as little as $10 a month. Leave a thoughtful legacy.Used with Permission. Published by IMN Bank Adviser Includes copyrighted material of IMakeNews, Inc. and its suppliers.