ST. PAUL, Minn.--(BUSINESS WIRE)--Have you thought about what would happen if you or a person whose debt you cosigned died suddenly?
When Securian Financial Group posed that question to 1,004 Americans of all ages in an online survey last September, nearly one third (31 percent) said they had not thought about it.
“No one wants to think about dying, but there are financial consequences our families and heirs would face from the sudden death of a primary borrower,” said Michelle Hall, manager, Market Research. “This is true especially when debts exceed assets, which is the case for more than half (56 percent) of the 825 people in our survey who are primary borrowers and cosigners.”
In the report, “Debt: The inheritance nobody wants,” Securian describes Americans’ awareness of the liability associated with debts and loans should the unthinkable occur.
“I would be very worried about them.”
Respondents are emotional about leaving debt to loved ones. Among those who commented, many said they it would be “unfair” or they “would feel terrible” if they left debt behind.
If there is no cosigner, the lender will seek to collect the debt from the estate, which could result in the sale of assets including cars and other property. If a spouse, child, parent or anyone else cosigned a loan with the deceased, the cosigners are liable for the debt. A spouse is responsible in a community property state even if he or she did not cosign the loan. That’s a lot of “ifs,” considering that 57 percent of the respondents are married and another 11 percent are divorced or separated.
“I feel a lot of pressure with my cosigner’s debt”
About one-fourth (24 percent) of all respondents have cosigned loans. When asked to select all that apply, nearly half of that group (46 percent) cosigned with spouses, 30 percent cosigned with their children and approximately one-tenth cosigned with parents or other family members (11 and 10 percent).
Comments indicate some awareness of cosigner liability. Others dread the sudden responsibility of someone else’s debt. They call it a “burden” and say they are “overwhelmed” by the responsibility. When asked to select all that apply, the most frequently cosigned debt is credit cards (39 percent), followed by consumer loans (37 percent) and mortgage loans (34 percent).
“I have life insurance to cover the debts”
Among the 825 respondents who hold primary or cosigned debt only seven percent have plans in place to cover the debts if they or their cosigners die unexpectedly. The majority of those who commented said they’ve purchased life insurance to fill that need. Many also have wills in place. Nine percent said they have no need.
When asked what preventative actions they would likely take, more than half (55 percent) said they’d have wills drawn up. The next most popular option (40 percent) was to buy insurance that would cover the debt and nearly one-third (31 percent) said they would seek professional advice.
Since 1880, Securian Financial Group and its affiliates have provided financial security for individuals and businesses in the form of insurance, investments and retirement plans. Now one of the nation’s largest financial services providers, it is the holding company parent of a group of companies that include Minnesota Life Insurance Company and Securian Life Insurance Company. Minnesota Life Insurance Company is authorized to do business in all states except New York, and it does not do business in that state. Securian Life Insurance Company is authorized to do business in New York. Insurance policies are not available in all states.
DOFU – 12-2013