Money And Investing  -

Dead People Can’t Pay Their Loans

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-------- Don’t Take Debt Insurance Unless You Really Need It

Young people are often enticed to take a Life Insurance Policy on their Auto Loans, or even Credit Card Debt. The salesperson tells the young guy/gal that if they die, their estate will not have to pay for the debt. How nice of them!

The reality is that no-one had to pay for the loan – the estate does not inherits debts, whatever is not covered by the individual’s assets at the time of death is written off by the bank! (However, it is true that if the bank can’t recover their money, they will take the assets that where backing it away – it is not as if you can get to drive your car after you die.)

Of course, the bank is very happy to make sure that you have no excuses to pay off your debt, even if you die. But it doesn’t benefit you at all.

What is worse: the cost of debt related life insurance is usually higher than Term-Life Insurance for comparable amounts. Even if you have a wife and ten kids and want to be sure they can pay off the house, the Hummer, the Volvo, and the Mini-Van, you are better off getting term insurance rather than four individual debt insurance policies.

My advice: just save those few bucks that you would pay in debt insurance and put them into your IRA. By the time you are about to die you would have paid the car, the house, and will have a nice nest egg.