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Published: Jan 12, 2024 5 min read
Photo collage of a worried woman looking at a bill and man using his phone , with dollar bills and receipts in the background
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Debt may be a fact of life — but it’s quickly becoming a fact of death, too.

Nearly half of Americans expect to outlive their debt, passing it on to their loved ones after death, according to new survey results. What’s more, the data shows that a higher number of wealthy Americans think they'll leave their family and friends with debt than those who earn less, and — despite these concerns — many people who worry about saddling others with their financial obligations have foregone life insurance policies.

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Who might pass on debt when they die

A whopping 46% of Americans say they believe they would pass on debt to their loved ones if they died today, according to insurance company Policygenius’ 2024 Financial Planning Survey.

Admittedly, it's a stressful time. Since 2019, U.S. households have collectively taken on $2.9 trillion in debt, per the report. The average adult carries a debt of almost $22,000, excluding mortgage costs. Credit card debt in particular is an increasingly precarious situation, accounting for an average of $6,000 debt per cardholder (exacerbated by interest rates that keep borrowers trapped in repayment).

Whether you believe you'll pass on debt to others in debt has much to do with demographics, too.

In the case of student loans, 17% of millennials expect that their loved ones would inherit their debt if they died today, compared to just 7% of Gen Xers and 2% of baby boomers (FYI: Federal student loans are typically discharged when the borrower dies, but private lenders can charge the debt to the borrower's estate).

More people with children expect that their loved ones will be forced to take on their debt in death than childless people, too; 60% of parents say their loved ones would need to pay down their debt in the event of death compared to just 38% of childless adults.

Perhaps most surprisingly, wealthier survey respondents tend to fear passing their debt onto loved ones more so than less-wealthy Americans. Of those earning $150,000 or more per year, 58% say they expect to pass on debt, compared to 47% of those earning less.

Policygenius says this is most likely due to the accessibility of credit for wealthier folks. Those with higher incomes can borrow more, allowing affluent Americans to have larger amounts of debt than those who earn less.

How life insurance can help with debt after death

Another key finding of the survey was that 21% of those who expect to pass debt onto loved ones do not hold a life insurance policy.

With life insurance, you pay premiums to an insurance company in exchange for a payout to your beneficiaries when you die. These life insurance payouts can help lessen the burden of debt passed onto loved ones.

Life insurance is generally recommended for older Americans without savings or parents with dependents; prices typically hover around $30 per month for term life insurance or about $517 for a whole life insurance policy.

Though 70% of respondents to the Policygenius survey say they view life insurance as a way to provide for dependents in the event of death, others say it serves mainly as a way to invest, evade estate taxes or a cash reserve to borrow from. Those who view life insurance as an investment tend to skew younger than those who see it as an aid to dependents. Interestingly, while 80% of childless respondents see life insurance as a way to provide for dependents, only 70% of parents say the same.

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