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Should You Take Out Life Insurance to Cover Loans?

By December 21, 2015 June 9th, 2020 No Comments

family playing in fieldMany people purchase life insurance policies to help cover their final expenses. Depending on your medical needs, life insurance is a great way to ensure that hefty medical bills don’t plague family members when you are no longer around. Unfortunately, many people don’t consider that they can also purchase life insurance to cover the costs of paying for loans.

Why Life Insurance to Pay off Loans?

No one wants to leave their debts to their loved ones after they are gone. You want your children to inherit your assets, preferably assets that are owned free and clear. If you have a mortgage or a car, your life insurance policy is one of the best ways to help them take care of the payments, without experiencing any financial strain. The lump sum death benefit they’ll get, as a result of being your beneficiary, can take care of the balance on your assets. By doing this, they haven’t simply inherited your assets, they’ve inherited your legacy as well.

What Type of Life Insurance is Best for Paying off Debt?

There are many different types of life insurance policies available; however, the best policy is the one you can afford to keep. Before you consider what type of insurance policy is best for you, consider what your goals are beyond paying down your debt. How much do you owe on your mortgage? Do you want your family to have additional money after paying off your debts? Working with an independent insurance agent can help determine a strategy for you.

You may want to inquire about the following types of life insurance policies:

Term Life Insurance.
Term life insurance expires after a certain length of time. Many people find term life insurance attractive because they can purchase a lot of coverage with a relatively small premium. Additionally, a 30-year term life insurance policy works great coupled with a 30-year mortgage.

Whole Life Insurance.
Whole life insurance is permanent coverage. If you choose a whole life insurance policy, you can use the death benefit to pay down debt, or you can use the cash value of the loan to pay down debt.

Universal Life Insurance.
Universal life insurance is a hybrid model, containing some of the best aspects of both a term and whole life policy. However, universal life insurance is permanent insurance, which allows your family members to cover the cost of your assets by using the death benefit or the cash value.

If you have debt, then purchasing a life insurance policy is a great way to secure your family’s future. The death benefit can easily help them protect the assets they inherited from you.

Which type of coverage is right for you? Call Loftis & Wetzel Corporation at (855) 360-0466 for more information on Oklahoma City life insurance.