If you’ve taken out a debt consolidation loan, the odds are good that you need to increase your life insurance, too. At least that’s the view from AccuQuote, a provider of term life insurance quotes to U.S. residents. Officials from AccuQuote, in a recent news story, said that consumers who increase their debt also increase their need for more life insurance coverage. Now, AccuQuote does have a vested interest in convincing consumers to take out more life insurance. But, despite the obvious sales pitch, there is truth in what AccuQuote says. Taking on more debt, to the point where you’ve taken out a debt consolidation loan to deal with it, does a lot of things: It stops the calls from collection agencies. It gives you a chance to get your financial life back in order. It hurts your credit score. And, yes, it does increase the need for more life insurance.
Look at it this way: The goal of life insurance is to provide protection for your loved ones. If you were to die today, you’d want your life insurance policy to provide enough financial support to your loved ones that they’d never have to worry about lacking the money they need. Ideally, a life insurance policy will help them pay off your home and provide for your children’s education. However, it’s much more difficult for this to occur if you happen to die while carrying a significant amount of debt. And if you die after taking out a debt consolidation loan? That’s a sign that you have a lot of debt. And just because you die, that debt doesn’t disappear.
Paying Down Your Debt
Your loved ones would have to use some of the funds from your life insurance policy to pay off your debt consolidation loan. That leaves fewer dollars remaining to cover the mortgage of your home and your children’s college education. It also places an additional financial burden on your spouse. If you have taken out a debt consolidation loan, then, you have two choices to prevent your loved ones from facing a lifetime of financial stress: You can pay off that debt consolidation loan quickly, or you can take out more life insurance.
It may seem counterintuitive to take out more life insurance if you are already struggling with debt. Taking out more just adds to your monthly payments, and makes it that much more of a challenge to pay down your debt consolidation loan. But by making the financial sacrifice now, you can rest easy knowing that you have taken the steps to guarantee that your loved ones can live a life free of financial stress should you die unexpectedly.