Many insurance companies use fear to sell policies. A common fear-mongering approach is to tell a consumer that he must buy life insurance in order to avoid saddling his loved ones with debt after his passing. Not only is this type of emotional plea unfair advertising, it's not even accurate. Most debt dies with the person who carries it, so your children won't be affected once you go.
Unless an individual is a cosigner of a person's loan, he is not responsible to pay the debt. In some situations, married couples may share debt, so certain expenses like a mortgage or any other purchase based on a couple's joint credit will be the responsibility of the surviving spouse. It's worthwhile to purchase a life insurance policy to help your spouse pay off the mortgage; it's not necessary to buy a policy to protect your children from inheriting your debt.
How Death Affects Debt
Whenever a person passes away, his estate is responsible for paying off his affairs. This means that any outstanding debts such as credit cards, medical bills or car loans will be paid out of the estate. Before the inheritors receive any money, all existing bills are paid off first.
If a person does not have enough assets to cover his bills, the assets will be divided as equally as possible between all debts. Preference is given to secured debts, so unsecured loans and credit cards may not be paid if the deceased does not have enough assets to cover those expenses.
If there is any money or property left in the estate after the debts are paid, the remaining balance is given to the deceased's beneficiaries.
The Role of Life Insurance
Life insurance policies are not included in a person's estate. This means that the funds pass directly to the insurance beneficiary without needing to wait for the probate process to be completed. It also means that the funds are unaffected by debt.
The primary purpose of life insurance is to replace a person's income when he or she is the main provider for a family. It can also be used to help provide money for a person's children if the insured person does not have many assets or if her estate will be used up in paying off debts but she wants to leave behind money for her children.
There are many valid reasons to get life insurance quotes online and buy a policy. It can help your loved ones live without your income for several years, pay for your funeral expenses, start a college fund or more. Paying off debt with life insurance is unnecessary, though, so if that's your primary reason for purchasing a policy, you can do better to spend your money on other things.
The money you would waste on an insurance policy can be better used toward paying off your debt or enjoying time with your loved ones. If it turns out that you do need life insurance, LifeInsuranceQuotes.Info is a good place to get life insurance quotes online.