How Debt Can Impact Your Life Insurance Coverage
Wednesday, August 11, 2021
When looking to purchase life insurance, it’s essential to recognize how credit scores might impact your plan. A poor credit score might not result in outright denial, but it could make the premium payments higher. You may have questions about how to use life insurance to pay off debt, and our Independent Insurance Associates agents can help answer them. Remember that the whole point of purchasing a life insurance policy is to protect and care for your loved ones in the event of your death.
How Does My Credit Impact My Life Insurance Policy?
Every insurance company has a set of rules for deciding rates and coverage for a new customer. Your credit score will be a part of their assessment. Insurers prefer to take on reasonable risks, and having a low credit score will raise some flags. Bankruptcy is another red flag, and the only way to find out if you can purchase a life insurance policy is to go through the application process. Your Independent Insurance Associates agent will work with you to answer any questions you may have.
Even if you have a low score, it will be worth the effort to apply for coverage. You may pay higher premiums overall, but the whole point of having a policy is to shield those you love from financial ruin should something happen to you.
Does Life Insurance Have To Pay Debt?
When putting together a financial plan for your loved ones, life insurance will significantly protect and support your loved ones. When you name your beneficiary, you are more than likely thinking about how your debts and obligations will affect the people you leave behind. Your beneficiary will have the freedom to use the money as they prefer; more than likely, those funds will be replacing your income for the foreseeable future.
An example of good planning is choosing a term life plan to at least match the duration of your mortgage obligation. Your beneficiary will be in a much better financial position paying off the mortgage instead of having to sell the home and downsize to meet other financial needs.
Can Creditors Go After Life Insurance?
The rules on your death benefit are different from most monetary arrangements. Life insurance is one of the best-protected assets you can own. You may be concerned about a few additional questions:
- Can life insurance be garnished for debt?
- Can creditors come after life insurance?
A creditor could only use your life insurance to settle debts if you fail to name a beneficiary. When you set up your policy, you should bring a list of questions to help facilitate a comprehensive plan. If you have specific ideas about how your death benefit should be utilized, clarify those issues ahead of time. Again, the purpose of life insurance is to make sure your loved ones are free from unmanageable debt!
Your local Independent Insurance Associates agent can answer any questions you may have about life insurance. Understanding how to plan for your loved ones is our job. Even if you have questionable credit, it will be worth contacting us to review your options. Purchasing a life insurance policy that will last beyond your most significant financial obligations is a great place to start when protecting your dependents.