Let’s set the scene… You are 23 years old and fresh out of college. You have your degree and are ready to take on the world. At this point, you probably aren’t considering life insurance because who is dependent on you? Just you, right? But… there is probably something you didn’t take into consideration: your student loan debt.
Say something were to happen to you. Do you know what happens to your student loan debt? Does it just disappear? Maybe…but maybe not, and that’s where life insurance may be able to help you and your family.
If all you have is federally-backed student loans, then you don’t need to worry. In general, upon death, these will be discharged, after correct documentation is provided from your family. However, if you have privately backed loans, it won’t be this easy for your family to get out of.
Here is how life insurance helps
If you have privately backed students loans, your family can use proceeds from your term life insurance policy to pay back the debts. When looking at how much coverage to get, make sure it is equal to the amount you have in student loans. For example, if you have $35,000 in loans, make sure you get $35,000 in coverage.
Unfortunately, things get slightly more complicated if you add co-signers or spouses into the equation. With a co-signer, should you die, they will become 100% responsible for your loans. But, should your co-signer die, you might be asked to repay the loans in full immediately. Either way, you want to make sure you and your co-signer are covered with a life insurance policy. As for your spouse, they may become responsible for your loans even if they did not co-sign for the loans. Either way, a life insurance policy will protect your spouse should they become responsible for them.
So, if you have student loans, you might want to consider a life insurance policy. Additionally, if you are a parent or spouse, it might be smart to take out a policy on your child or spouse. While it is not a scenario that is enjoyable to discuss, it is a very real scenario. The best thing you can do is to be prepared should disaster strike.