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View Full Version : Loans, something to think about, unfortunate situation.


mattfromNY
12-27-2011, 04:36 PM
Recently a very good friend of mine passed away unexpectedly. Young guy with a wife and 3 young children. He owned his own contracting business and was doing very well (at least to the outside world, I'm sure only him and his banker knew for sure).
At his services, I happened to run into my banker (coincidentally, my banker was also his banker), and found out that my friend never took the option of disability/ life insurance on any of his equipment loans. He owes on excavators, dozers, skidsteers, trucks, etc.
Though I partially blame the bank for not requiring the insurance (maybe they cant? legally require it? I dont know for sure) I feel really bad for my friends' wife, who is now still responsible to repay those loans. Had my friend opted to pay the additional couple dollars/ month, all of his loans would have been wiped clean at the time of his death.
Just something that is on my mind today as I do paperwork and end of year. I have always opted to take the extra insurance on my loans. It is a couple dollars more per month, but it is also peace of mind, less of a mess for my family to clean up, if anything should happen to me.
Hope everyone had a great Christmas. Happy New Year, have a safe and prosperous New Year!!

GreenI.A.
12-27-2011, 05:14 PM
Sorry for the loss of your friend, but this can't be blamed on the banks and rest solely on his shoulders for not being properly insured. Most people would complain if the banks forced them to buy an insurance. Many people just look at the final fees/interest, if one bank required people to buy death/dismemberment insurance, then many people would just see they they charge more than another bank who does not require it. I know if anything, I am onverly insured. Every vehicle and piece of equipment is covered by death/dismemberment insurance. I'm covered with more than enough in life and cancer policies. I'm worth more dead than alive

IES
12-27-2011, 06:37 PM
That's too bad. Just to be safe though the widow should have an attorney look at the way the debt and assets are structured. Just because they were married doesn't make her liable necessarily. It would be worth checking. It is highly recommended to have insurance to cover debts and family needs once provider is deceased. Btw cheaper to get life policy to cover all debts than the amounts individual loans will charge.
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Efficiency
12-27-2011, 07:48 PM
some of the better advise a mentor gave me was to insure my life for the total value of my outstanding debts plus the payout I want to leave my loved ones.

mattfromNY
12-27-2011, 08:00 PM
Good points, guys. I am not sure if he operated his company as a sole proprietor, LLC or Corp, I'm sure that would have some bearing on the outcome for his wife. I havent spoken to any of the family since the services, but have heard through the rumor mill that all of the equipment is scheduled for auction soon.
I, like GreenIndustry, am worth more in a box than on a mower as well. lol.

GreenI.A.
12-27-2011, 08:16 PM
whether he is a sole, LLC, or Corp, may not play in to much at all. If he didn't have good credit established under the company name then he more than likely signed a personal garuentee on the loan, which makes hime (and more than likely his estate) liable for anything the business can't pay on the loan. When I worked in the distributor end I am willing to bet less than 1% of guys coming to me qualified for an equipment loan or line of credit with out signing a personal gaurentee.

mattfromNY
12-27-2011, 08:23 PM
Another valid point. Thanks.

McFarland_Lawn_Care
01-11-2012, 08:18 PM
Rule of thumb, be insured for your debt as well as your annual salary for 10 years. Say you owe 100K and you make 40K salary - you'd want to be insured for 500K. That way your wife or family can payoff the debt and invest the rest (400K) and make enough off the interest to make the living that you would have. I'm sure it's harder if you're older, but for us younger guys it's pretty low premium to pay for the safety of your loved ones. If you have a big enough nest egg, don't worry about the life insurance.

DuallyVette
01-11-2012, 09:43 PM
I don't have a wife or children, so I don't have life insurance (it's also a personal responsibility thing, and a Libertarian thing). I basically believe that insurance is a scam. Although everybody dies some day, people usually drop the insurance after their children are grown, or just get tired of paying the premiums.Life Insurance premiums are 95% profit.

Many lenders use to require life & disability on loans back in the 1960's. Congress made the lenders quit. The attached insurance was well overpriced.

Bunton Guy
01-12-2012, 09:36 AM
I've seen insurance refuse to payout many MANY times. Even accidental death insurance,life insurance & loan insurance. It scares me I don't know which way to choose. It's a roll of the dice....

Thanksman
01-12-2012, 10:06 AM
Sorry to hear off your loss.

KS_Grasscutter
01-12-2012, 10:42 AM
I ended up with the insurance on a loan once, but took it off because it was 10 bucks a month. I figure I have plenty of equity in everything so my girlfriend and parents could sell my stuff and come out well ahead.
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Roger
01-12-2012, 05:20 PM
.... Although everybody dies some day, people usually drop the insurance after their children are grown,....

Quite to the contrary!!! With Estate Taxes, carrying insurance to cover the taxes becomes vital. Heirs may be wiped out, just to cover the taxes.

I've yet to hear a cogent argument on why the government believe they are entitled to up to 50% of the leftovers.

With no insurance, and outstanding debts, somebody will be obligated to pay them off. Why would you wish to saddle others with this burden by choosing not to cover? Just because you have no wife and children, somebody is still obligated to cover.

DuallyVette
01-12-2012, 08:12 PM
Quite to the contrary!!! With Estate Taxes, carrying insurance to cover the taxes becomes vital. Heirs may be wiped out, just to cover the taxes.

I've yet to hear a cogent argument on why the government believe they are entitled to up to 50% of the leftovers.

With no insurance, and outstanding debts, somebody will be obligated to pay them off. Why would you wish to saddle others with this burden by choosing not to cover? Just because you have no wife and children, somebody is still obligated to cover.

Statistics Do show that very few death benifits are actually paid. I personally don't have any debt. So when I die, my siblings can fight over the assets.

For the young family in the OP's senario...It will be a tough row to hoe. If I had a family, I certainly would look at it differently.

Roger
01-12-2012, 08:20 PM
Siblings aren't family, huh? Like fighting, huh? Sorry, we can't agree with the assertion about claims not being paid. If not, the insurers would be only a source of income, with no outflow. We know this NOT to be the case. If so, we would all own insurance companies, not cutting grass.

Still looking why the government is entitled to 50% of assets (above limits) after death.

DuallyVette
01-14-2012, 02:33 PM
Siblings aren't family, huh? Like fighting, huh? Sorry, we can't agree with the assertion about claims not being paid. If not, the insurers would be only a source of income, with no outflow. We know this NOT to be the case. If so, we would all own insurance companies, not cutting grass.

Still looking why the government is entitled to 50% of assets (above limits) after death.

{Siblings aren't family, huh? Like fighting, huh? } I don't provide financial support to my siblings, so anything they get will be a benifit. My death shouldn't mean that they won the lottery. I believe money should be earned. As for fighting, some heirs will fight over the $10k or $10 million that you leave just the same.

Yea...the government shouldn't get your assets after your dead, the should go to family & friends, or your favorite causes( so their CEO can buy a new boat :) )