How To Use Life Insurance To Pay Your Student Loans?

How To Use Life Insurance To Pay Your Student Loans?

Everything is becoming more and more expensive with each passing day. From healthcare to education, the costs of even the basic necessities of life are rising. But that doesn’t mean that you will give up on them. With the right kind of planning, you can effectively use a life insurance policy to pay your student dues. How, you ask? Take a look at the points mentioned below to get your answer.

Life insurance and you – education costs

There are certain kinds of life insurance tools that can help you amass a wealth and then assist you to clear your student loans. Let us understand how these work.

  1. ULIP: A unit linked insurance plan, or a ULIP, is a product that combines insurance and investments. You can buy a ULIP and start saving money. Your savings will grow as well and very soon you will have enough to clear your student dues. If unfortunately you die within the policy period, your beneficiaries can use the death benefit to clear your dues. This is a very practical and sure-shot way to create wealth as it is safe and less risky as well.
  2. Money back plan: This is ideally something a parent should do for a child when the child is young. If you have a money back plan, you will stand to receive a lump sum amount of money when you graduate from college. You can effectively use that money to clear your student loans and also get a heads-up in your career.
  3. Loan against a policy: You can take a loan against your life insurance plan. If there is a desperate need for money and you are about to default on your student loan, you can go in for this option. However, this should only be seen as a last resort and not a norm, as you should ideally keep your life insurance fund intact for the future financial well being of your family members.

Why do you need life insurance?

Life insurance is a complete necessity in today’s day and age. You cannot afford to stay without a life insurance plan simply because life has become tremendously unpredictable. And the expenses are constantly rising as well. Have you imagined what will happen to your dependent family members if you suddenly die? How will they cope with the financial shortcomings? And on top of that, if you have a large student loan to repay, even that burden will fall upon them. So to stay one step ahead in the game of life, you need life insurance. In relation to your student debts, you specifically need life insurance:

  • To pay your dues: Like mentioned above, you can intelligently use the various life insurance plan options to pay off your student loan dues. You can choose to invest in a ULIP or a money back plan and gradually clear the debt. You can also choose a short term endowment plan. You will be forced to save on a regular basis and very soon you will have a corpus large enough to pay off the dues. And all this will happen while your life remains covered.
  • To keep family your secured: No one thinks they will die, and in all probability, you don’t either. You therefore must have invested a lot into your future and studied at the top university to carve out the best career path for yourself. However, you are now liable to repay a large student loan, which you are doing diligently. But what will happen if you die unexpectedly before repaying the amount? Well, your hapless parents will have to clear the dues because the financial institutions won’t take any emotions into account. To prevent any such unpleasant situation from affecting your loved ones, buy a life insurance plan if you are still repaying your student loan. If you die, the death benefit can be used to clear the loan and your parents won’t be responsible for anything after that.

In a nutshell

A life insurance plan can effectively be used to pay a student loan. Use the life insurance options strategically and tackle your finances. Pay off the student loans but also try to keep the life cover intact to the greatest degree possible.

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