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Loans, something to think about, unfortunate situation.

Discussion in 'Business Operations' started by mattfromNY, Dec 27, 2011.

  1. mattfromNY

    mattfromNY LawnSite Bronze Member
    Male, from Central NY
    Messages: 1,582

    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!!
  2. GreenI.A.

    GreenI.A. LawnSite Silver Member
    Messages: 2,131

    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
  3. IES

    IES LawnSite Senior Member
    Messages: 296

    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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  4. Efficiency

    Efficiency LawnSite Bronze Member
    from zone 6
    Messages: 1,817

    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.
  5. mattfromNY

    mattfromNY LawnSite Bronze Member
    Male, from Central NY
    Messages: 1,582

    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.
  6. GreenI.A.

    GreenI.A. LawnSite Silver Member
    Messages: 2,131

    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.
  7. mattfromNY

    mattfromNY LawnSite Bronze Member
    Male, from Central NY
    Messages: 1,582

    Another valid point. Thanks.
  8. McFarland_Lawn_Care

    McFarland_Lawn_Care LawnSite Bronze Member
    Messages: 1,445

    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.
  9. DuallyVette

    DuallyVette LawnSite Gold Member
    Messages: 3,958

    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.
  10. Bunton Guy

    Bunton Guy LawnSite Bronze Member
    Messages: 1,917

    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....

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