Consumer household debt rose to a new record high of $18.3 trillion in the second quarter of 2025.¹

If you’re among the millions of Americans with debt, you may be wondering what happens if you pass away before you settle those obligations. Some debt can erode assets that you had hoped to leave to your heirs. In certain cases, family members may be personally on the hook for your debt. Spouses and others are generally responsible for paying debts if they are joint account holders or if they co-signed a loan.

Many people buy Life insurance to cover debt and final expenses. It can help your loved ones settle your obligations without going into debt themselves.

In most cases, Life insurance proceeds can’t be touched by creditors as long as an individual beneficiary is named on your policy. If you neglect to name a beneficiary, Life insurance proceeds generally revert to your estate, and could be available to creditors during probate. For this reason, it’s a good idea to keep your beneficiary information updated.

Term Life insurance is suitable for most people’s needs. You can select a policy length that matches the anticipated duration of your longest debt or look for an annually renewable term policy that may better fit your needs. The Alumni Benefits Program offers both options.

¹ Quarterly Report on Household Debt and Credit: 2025:Q2. Federal Reserve Bank of New York. www.newyorkfed.org/medialibrary/interactives/householdcredit/data/pdf/HHDC_2025Q2 , August 2025.