Using Life Insurance to Pay Off Debt
Using Life Insurance to Pay Off Debt After You’re Gone
Of course, the most common reason to buy life insurance is to provide for your loved ones after you’re gone. That includes paying for any debt you leave behind. There are no restrictions on what they can use that money for. They can pay the rent, buy groceries, pay off your credit card, buy a car, or even pay off the mortgage. Every penny of that policy goes to your loved ones, too. Once they file a claim, it will be paid out 100% income-tax-free.
The only cases where the death benefit isn’t income-tax free is if you overfunded your policy in the first seven years and the IRS changed its status. As long as you make your payments in the requested amount (without overpaying), you and your beneficiaries are fine.
Want some in-person advice on using life insurance to pay off debt? We’re here to help! Call us at (800) 521-7873 and ask our licensed agents any questions you have. Or click the button below to start with a free term life quote.
