How Debt Affects Your Life Insurance Policy

One of the functions of life insurance is protection from financial risk. Your policy is intended to ensure your loved ones have all the support they need if you should die. However, it may not adequately cover the additional debts or increased lifestyle costs that can come from pursuing an ambitious and successful life.

Financing a Business Venture
If you’ve taken out a loan to start a new business, be sure you have enough life insurance to properly cover this obligation. It will protect your loved ones from the risk you are taking.

You may also have used your savings to finance the new venture. This could affect your family’s inheritance. An addition to your policy can make up this difference, and the death benefit will bypass estate taxes and the lengthy probate process.

A New Job
With each promotion, you’re achieving that career you’ve always wanted. As you pursue your vision for the future, keep in mind the increase in your salary and the lifestyle changes that go with it. Ensure your life insurance policy is in line with your success.

Lifestyle Debts
Did you take out a loan to buy a new, or larger, home? Or, to consolidate debts? Shifts in your finances can make a big difference if your loved ones face a fixed income without you. Consider how your family will afford the extra cost.

Discuss this debt load with your Financial Advisor. Good planning will ensure you leave your beneficiaries with enough to pay your debts and cover their present living expenses.

Term or Permanent Insurance?
Most debts are not permanent but temporary. For this reason, term Life Insurance is an excellent solution. Term life insurance typically costs less, offers higher death benefits, and provides coverage for a limited time frame. Such as the 20 or 30 years needed to pay off that mortgage. Once the term covered by your policy has expired, there is no death benefit for your survivors.

Permanent debts, such as burial costs and estate taxes are covered by permanent Insurance. Permanent Insurance, or whole life, insurance is in place throughout your life. It guarantees a death benefit for your family. Both types of insurance pay out tax-free to your family.

Life insurance is your family’s protection. Ensure it accommodates the changes in your life. Review your current policy with your Financial Advisor and discuss any modifications that might be needed.