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Anyone take out life insurance on their kids?
Old 03-07-2019, 08:11 AM   #1
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Anyone take out life insurance on their kids?

Now that I'm 1 yr away from retiring, I'm looking at my adults children who have student debt. I am co-signer on a bunch of student loans so, if anything happens to them (God forbid) I am on the hook for their debt.
This would put a crimp in our retirement (an understatement).

I have been advised to take out life insurance policies for them, or have them do it. Have to plan for contingencies.

Has anyone else taken this step?

Thx,
Rob
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Old 03-07-2019, 08:34 AM   #2
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I wouldn't do it. Can you really take out an insurance policy on another adult without their signature/consent/whatever and make yourself a beneficiary? If your kids agree to take out life insurance and make you the beneficiary, what happens if their life circumstances change? They could change the beneficiary to their spouse/children.
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Old 03-07-2019, 08:56 AM   #3
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My view is that it is their debt and they should be the ones responsible for repaying those debts; including having sufficient insurance coverage to cover those debts in the unfortunate event that they die prematurely.
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Old 03-07-2019, 08:58 AM   #4
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My view is that it is their debt and they should be the ones responsible for repaying those debts; including having sufficient insurance coverage to cover those debts in the unfortunate event that they die prematurely.
Morally, yes, it is their debt. Legally, OP made it his debt also.
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Old 03-07-2019, 09:01 AM   #5
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I wouldn't do it. Can you really take out an insurance policy on another adult without their signature/consent/whatever and make yourself a beneficiary? If your kids agree to take out life insurance and make you the beneficiary, what happens if their life circumstances change? They could change the beneficiary to their spouse/children.
I knew a logger who claimed he had a policy on a logger he competed with. He claimed that the other guy was such a thief that someone would surely kill him(they were both thieves). Never say the policy so I couldn't say it was true..
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Old 03-07-2019, 09:01 AM   #6
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My view is that it is their debt and they should be the ones responsible for repaying those debts; including having sufficient insurance coverage to cover those debts in the unfortunate event that they die prematurely.
Agreed, but the OP stated that they are cosigners, meaning that if something happens to the borrowers, they could be legally on the hook. In reality, I think the responsible thing to do is for the borrowers to carry just enough life insurance on themselves to pay off their student loan debts. But the OP can't force them to do that, so they have to ask whether or not the risk of going "on the hook" is something they can self-insure or need help covering.
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Old 03-07-2019, 09:06 AM   #7
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Wow, co signing loans. Personally, not even for family. A huge red flag goes off in my head from past experience. But, as loving parents, you helped your children. Would your children agree to the policy? It makes sense.
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Old 03-07-2019, 09:25 AM   #8
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IMO, taking out an insurance policy on your kids for whom you have assumed a legal liability for their debt is no different than business partners taking out insurance on each other in case one dies and leaves the other with more debt/expenses than one partner can handle.

Note: If your kids are young the most likely problem will be disability not death. You might talk to an insurance agent about that.

There are lots of ways to help our children but signing on to their debts is not one of them, IMHO. Like my old grand-pappy used to say, "There are no scholarships for retirement."
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Old 03-07-2019, 09:28 AM   #9
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I thought student loans go away at death!?

As to life insurance, if the loans do not get extinguished at death, sure why not. Term life insurance on young healthy people costs nothing. You'd own the policy so you'd be in control. Not a big deal. I would do it if there death would harm your retirement.
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Old 03-07-2019, 09:31 AM   #10
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Like my old grand-pappy used to say, "There are no scholarships for retirement."
This is the approach DF took with us kids. If we wanted a loan, it was on us. Right or wrong, I came out ahead financially and wiser because of that hard rule.
He did pay for a few books and a semester though I remember I got a C in 1 of my 5 classes and that was the end of help for college.

He also helped with a down payment (lent the "gift") on a home, and he gave each of us kids a reliable $1000 car so we could get to work and school activities. We all had jobs in high school. My DW on the other hand was raised in a class above mine, where she did not have to work in high school or college. So, it's true money does buy options. I was a stressed out college kid with a little help and she was a stressed out college kid with a lot of help.
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Old 03-07-2019, 09:36 AM   #11
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I thought student loans go away at death!?
Depends. Is it a federal loan or a private loan? Generally, federal student loans are canceled upon death. With a private loan, unless the terms specifically include discharge upon death of the borrower, the cosigner is still on the hook.
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Old 03-07-2019, 10:05 AM   #12
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Morally, yes, it is their debt. Legally, OP made it his debt also.
Understood. I co-signed for my kids as well.
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Old 03-07-2019, 10:09 AM   #13
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I think the responsible thing to do is for the borrowers to carry just enough life insurance on themselves to pay off their student loan debts.
Agreed. I was too brief in my post. My view is that it should be the kids -- not the parents -- having sufficient life insurance coverage to satisfy the loans should one of them die prematurely.
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Old 03-07-2019, 10:37 AM   #14
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With scholarships, 529 and my cash we got our kids thru college without loans. So, no direct need for insuring the kids.

But when I saw the post title, I guessed what it was about. How are they progressing on payments? If they are missing payments it could be that the debt is growing. If so, how much would you insure for?

I don't know how much you've committed of your assets. I would develop a plan which could involve insurance. You also need to keep up with how they are doing. Since you co-signed they can come after your if the kids miss too many payments IIRC.
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Old 03-07-2019, 10:41 AM   #15
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it would make 100% sense for the kids to carry just enough on a policy to pay off the debt. If they are young'ish, a 10 year term policy isn't going to cost very much.

When I got divorced at 40, part of our separation agreement was that I would carry $250k in insurance to cover child support/alimony in the event of my death. It was just a few hundred a year to have that for 10 years (it was about $15/month).

Just make sure you are listed as the owner of the policy and they are listed as a payee. They can see and pay the policy, but cannot change the terms of it (such as beneficiary) at all. You can see, pay (in case they don't for whatever reason), and change the beneficiary on the policy.
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Old 03-07-2019, 11:01 AM   #16
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And if its a Sallie Mae loan after a year of on time payments the cosigner can be removed from the loan.

https://www.salliemae.com/assets/stu...pplication.pdf
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Old 03-07-2019, 11:13 AM   #17
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Unless it is enough money to cause you trouble if one of them should die, let it be. The optics are bad. And the chances that any of them would die are very low.

Ha
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Old 03-07-2019, 11:18 AM   #18
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Originally Posted by albireo13 View Post
Now that I'm 1 yr away from retiring, I'm looking at my adults children who have student debt. I am co-signer on a bunch of student loans so, if anything happens to them (God forbid) I am on the hook for their debt.
This would put a crimp in our retirement (an understatement).

I have been advised to take out life insurance policies for them, or have them do it. Have to plan for contingencies.

Has anyone else taken this step?

Thx,
Rob
I haven't but I haven't been in that situation.

Yes, you should take out life insurance on those kids that you have co-signed a loan and would be on the hook for if the kid dies. Especially since you say that it would put a crimp in your retirement.

You clearly have an insurable interest since you are at risk of financial loss if they die. You should take out the policy with them as the insured but with you as the owner and beneficiary of the policy.

Since the balance and your risk will be declining over the years that loan payments are being made, you can do a ladder of policies. For example, say that the balance is currently $100,000 and will decay to $0 over 10 years. You could take out a 10 year level term policy for $50,000 and a 5 year level term policy for $50,000 and optimize the cost of protecting yourself from this risk. If the worst does occur you could always share any excess of the life insurance benefit over the student loan balance with the decedant's survivors if you chose to.
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Old 03-07-2019, 11:18 AM   #19
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This brings up a good point. Can student loans be taken without a parent co signing? I cant say I know anyone who's parents didnt co sign for them with student loans.
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Old 03-07-2019, 11:20 AM   #20
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I knew a logger who claimed he had a policy on a logger he competed with. He claimed that the other guy was such a thief that someone would surely kill him(they were both thieves). Never say the policy so I couldn't say it was true..
The implications would be astounding, for sure.
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