How Will Increasing Debt Levels Impact Life Insurance

Debt Levels are Rising at an Alarming Rate

Debt levels are grappling the world by storm. All across the globe, the debt levels are rising at an alarming rate. The student debt has been a topic of debate over the past several years and now has surpassed trillions of dollars. Moreover, it would take years to clear off the outstanding student loan debts while the other loans would keep piling up on the top of it. 

Home is one of the most pricey assets that you will indulge in your life term and that essentially comes with massive home loans. The modern world of today is made up of luxuries which further results with an increase in debt with car loans, credit cards, mortgages, and more. 

Moreover, compared to the earlier generations, retirement benefits have been substantially reduced. Employees no longer have the same health benefits after retirement as they used to. They are left to manage their 401(k) plans on their own and further save for retirement. Furthermore, the cost of living has also increased year by year.

Leaving Debts to Loved Ones

Leaving Debts to Loved Ones

The key factor, that many people seem to miss, is that your debt does not essentially mean ‘your debt’. Any debt is co-signed by a member of your family or a loved one. Your student loan debt might be co-signed by your parents and your home loan might be co-signed by your wife. In the advent of your death, that debt gets passed on to your co-signed, your loved ones. 

This has begun a cycle of carrying debt into retirement and leaving the huge piles of debt to the loved ones in the advent of early death. 

The situation is dire when the sole earning member of the household suddenly passes away. This leaves the spouse and the children with mounting house loans and no retirement savings. The entire family household is left with mounting bills and with no possible outcome. 

Such key factors have made getting a life and health insurance all the more necessary.

The Importance of Life Insurance

The popular belief that life insurance must be obtained until after your debts are cleared is absolutely untrue, as we saw from the above example. Contrary to that belief, life insurance at early stages in life would mean paying less and further protecting you and your family. 

Here are some of the reasons why buying a life insurance policy can be the answer to mounting debt in today’s modern world, especially at an early age.

Lock in Premiums at Lower Rates

Any life insurance policy would demand higher premiums as you age. Moreover, you will have to pay more with rising health problems in your older age like blood pressure. 

The popular policy AAA life insurance rates for a person in the mid-’30s have a premium ranging anywhere near $30 while the same policy has a premium of nearly $200 for a person in the mid-’60s. Locking in your life insurance at an early age would have lower rates and you can avoid paying higher premiums.

Paying off Mortgage Debts

One of the largest debt that individual encounters in the entire life is the mortgage or the home debt. It is a terrifying factor is that heap of mortgage loan is left or passed on to a loved member of the family. 

Life insurance can provide protection to your loved ones by paying off the mortgage loan in the event of death. It can provide long-term security to your family members and remove the financial burden off their shoulders. 
Modern innovations in the real estate space have made it relatively easier to keep yourself off the real estate asset loans. Through crowdfunded real estate and tokenization of real estate properties, it has become relatively easier to extract liquidity from the illiquid real estate assets.

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Aging Parents/ Sole Earning Member

As discussed before, your debt amount passes on to your co-signed members in the loan which can be your parents or your spouse. 

Leaving the huge amount of loans to be cleared by aging parents or spouse is a substantial financial burden. Furthermore, the situation gets worse if you are the sole bread earner in the family. Having a life insurance policy can cover the debt as well as ensure that your loved ones are taken care of to an extent.

Borrowing Money From Life Insurance Policy

In addition to all the other benefits, another advantage to having an insurance policy is that it can act as a source in the case of any emergency. In the case of a financial crisis in the family, the insurance policy can act as a safe haven to borrow money from. 

However, also keep in mind that the funds should only be used in the case of an emergency or immediate need and should not be looked as a source for accommodating the growing lifestyle.