4 Types of People Who Should Definitely Have Life Insurance

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  • Life insurance is a contract between you and an insurance company, in which the insurer promises 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 advises business owners and private student loan borrowers to 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, typically someone’s family member, if the policyholder dies. The contract specifies how much money your beneficiaries will receive.

It might seem morbid to talk about such details with a complete stranger at a life insurance company, but financial planner Spencer Betts says it’s worth having that protection in place if the worst happens, and it won’t cost much.

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“Life insurance for a person between 40 and 60 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 paid off after the borrower’s death, but borrowers with private student loan debt may face different circumstances.

The private student loan debt you contracted on your own can be easily paid off – although not always, each lender’s policy will be different – but the private student loan debt contracted with the cosigners will be passed on to the cosigners if the loans have been taken before November 20, 2018. Under a provision of the Economic Growth, Regulatory Relief and Consumer Protection Act, co-signatories must be released from the loan if it was taken out after November 20, 2018.

A life insurance policy ensures that your cosigner or a close relative can cover your student loan debt, regardless of the student loan lender’s policy.

2. Persons with co-signatories on their debts

Betts says, “If you’re single with no dependents and have a $ 20,000 auto loan, the auto company may get your car back, but they won’t chase any other person in your family because no one signed up for you.” Conversely, cosigners are responsible for paying unpaid debts after a person’s death.

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So, if someone has signed a personal loan with you, for example, you will want to have a life insurance policy that covers the cost of that debt.

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3. Entrepreneurs who want to pass on the family business to their children

If you’re an entrepreneur and plan to sell your business to your children after your death, life insurance may be more beneficial than you think, says Betts.

“If you die and you are the sole owner of that company, the value of that business may be subject to inheritance tax. You may need life insurance to offset the inheritance tax if you want to continue the business. family, your family’s farm, or something like that. “

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In the case of a partner-owned company, Betts states that business partners can enter into agreements on how corporate assets will be paid for, transferred, or divided in the event of the death of a business partner.

“Using a sales agreement,” he says, “you can specify things like: ‘If my business partner dies, I will pay his family $ 1 million, or half the company’s value at the time of his death.’ “

A life insurance policy with your business partner as the beneficiary ensures that they have those funds on hand and that your family gets the financial support they need.

4. Parents of children with disabilities

Betts says parents of children with special needs should have life insurance to make sure their childcare costs are covered after their death.

Says Betts: “This is one of the main reasons for getting life insurance that we see out there. If you have children with special needs, you may need life insurance so someone can help take care of your child. or long-term load. “

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