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- Life insurance is a contract between you and an insurance company, where the insurer agrees to pay a beneficiary when you die.
- Talking about what happens to your money after you die may sound morbid, but it’s worth it.
- A financial planner recommends that business owners and private student loan borrowers get life insurance.
Life insurance is a contract between a person and a life insurance company, in which the life insurance company agrees to pay a beneficiary, usually a relative of someone, if the insured person dies. The contract specifies how much money your beneficiaries will receive.
It may seem morbid to discuss such details with a complete stranger at a life insurance company, but financial planner Spencer Betts says that protection is worth having if the worst happens, and it won’t cost much.
“Life insurance for someone between 40 and 60 years old is very cheap because there is a very small chance that you will die,” he explains.
Here are four types of people who should have life insurance, according to Betts.
1. People with private student loans
Federal student loans are canceled after the borrower’s death, but borrowers with private student loan debt may face different circumstances.
Private student loan debt you took out on your own can be safely discharged, though not always, every lender’s policy will be different, but private student loan debt you took out with cosigners will be transferred to the cosigners if the loans were taken out before November. November 20, 2018. Under a provision of the Economic Growth, Regulatory Measures and Consumer Protection Act, cosigners must be released from the loan if it was obtained after November 20, 2018.
A life insurance policy ensures that your cosigner or next of kin can cover your student loan debt, regardless of the student loan lender’s policy.
2. People with guarantors of their debts
Betts says, “If you’re single, have no dependents, and have a $20,000 car loan, the car company might repossess your car, but they won’t go after anyone else in your family because no one signed for you.” Rather, cosigners are responsible for paying unpaid debts after a person’s death.
So if someone signed you up for a personal loan, for example, you’ll want to have a life insurance policy that covers the cost of that debt.
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3. Entrepreneurs who want to transfer the family business to their children
If you’re a business owner and plan to pass your business on to your children after your death, life insurance may be more beneficial than you think, says Betts.
“If you die and are the sole owner of that business, the value of that business could be subject to estate tax. You may need life insurance to offset estate tax if you want to continue the family business, the his family’s farm, or something like that.”
In the case of a partner-owned business, Betts says business partners can draft agreements on how business assets will be paid, transferred or divided in the event of the death of one of the business partners.
“Using a buy-sell agreement,” he says, “you can specify things like, ‘If my business partner dies, I’ll pay his family $1 million, or half the value of the business at the time of his death.'”
A life insurance policy with your business partner as the beneficiary ensures that they have those funds available and that your family gets the financial support they need.
4. Parents of children with disabilities
Betts says that parents of children with special needs should have life insurance to make sure their childcare costs are covered after they die.
Says Betts: “This is one of the biggest reasons to get life insurance that we see. If you have children with special needs, you may need life insurance so someone can help care for your child or long-term dependent.” term”. “