Reason #5 To Buy Life Insurance Now
You still have all that student loan debt
Life insurance is designed, in part, to cover debts you leave behind. Should that include student loans, so they won’t fall to your survivors? That depends on your lender.
“If you have a federal student loan, that debt is dischargeable when you die,” says Tyler Montell, vice president of Meridian Wealth Management in Shelbyville, Kentucky. “So a surviving family member can request to have that loan discharged. The key is that the debt is dischargeable, not automatically discharged. That is an important distinction.”
Private lenders are another matter.
“While one company’s policy may be to automatically discharge the debt, another company might assign it to a surviving spouse, parent or co-signer,” Montell says. “Worse, the loan contract might include an acceleration clause that brings the entire balance due at death.”
Insuring against those outcomes is relatively easy and inexpensive, according to Montell. You need to factor your student loan into your liabilities when determining how much life insurance you need.