College Graduation and Life Insurance: What You Need to Know
You studied and passed your finals, freshened up your resume, and finally walked the stage to get your college degree. With plans of finding your first job, enrolling in benefits, determining how much to put back in savings, and how to pay all your debt, life insurance may seem low on your priority list. However, if you do in fact have debt, you may want to consider moving life insurance higher on your list.
According to Student Debt Relief, an organization dedicated to the student loan crisis, about 71% of college students graduate with almost $28,500 in debt, including both private and federal loans. When the focus of life insurance is to ensure you don’t leave your loved ones in financial distress when you pass, college students who graduate with debt should consider the role life insurance plays in their financial portfolio.
There is no one-size-fits-all for life insurance. It’s completely dependent on your needs, health, and lifestyle. For recent graduates, students would benefit from a life insurance policy in a few common situations.
STUDENT LOAN DEBT
Federal loans
If your student loans consist of federal loans, they automatically get discharged should you pass away. This means no one would be responsible for your student loan debt because it dies with the student. This policy applies to parents who take out PLUS loans as well.
Private loans
Most private loans require a co-signer, typically the student’s parents. In this case, should a student in debt die, his or her co-signer would be responsible for repaying that student’s debt, even after they’ve passed. In the event there is no co-signer on a private loan, the lender would take from the student’s estate to pay back the loan. However, because most college students don’t have much money in their estates, the loan would most likely be discharged.
If there is a co-signer on a private loan, he or she is responsible for the student’s debt upon his or her death.
PREPARE FOR THE FUTURE
As most Americans do, newlyweds enjoy their time together and then start planning to have children. Even though you may not think of it at first, it’s important to plan for your child’s future. Without life insurance or a college savings account, your death could risk the possibility of your child going to college. Life insurance can help cover your child’s tuition.
YOUNG MARRIAGE AND CHILDREN
The “ring by spring” pressure has gained notice as it encourages college students who are in their final semester of college to find a potential spouse by the time of graduation.
After the initial excitement, many of these students will realize marriage brings shared responsibilities, such as debt. When you marry, you potentially marry your partner’s debt as well. For some, this shouldn’t be an issue. For others, it’s encouraged to understand the debt your significant other brings to the marriage and plan accordingly should they not be able to pay it. Life insurance can help protect your financial portfolio in the event of your spouse’s death.
Additionally, the Institute for Women’s Policy Research discovered nearly 11% of all undergraduate students are raising children without a partner. To be protected from life’s inevitable events, life insurance should be considered in a situation where there is only one income and a dependent.
LIFE INSURANCE COVERAGE FOR COLLEGE GRADUATES
Most college graduates could benefit from either a whole life or term life insurance policy. However, a term life insurance policy is typically cheaper than whole life, and cheaper is a good option for recent graduates who may not be on their financial feet yet.
When searching for a term life policy, you want the policy to cover all the debt you have incurred. For example, if your student loan balance is around $30,000, you’ll want at least $30,000 in coverage plus more depending on other debts like a car payment or credit cards.
Although life insurance is low on most priority lists, especially a college graduate’s, getting it while you’re young and healthy can be ideal because premiums are less expensive, and medical problems only make it pricier. Opening a policy while you’re young can not only help lessen the burden on your family, but also lock in lower premium rates.
At the end of the day, it’s important to remember the primary purpose of life insurance – to help protect those you love from financial adversity. Is it worth it to you?
Categories: Life Insurance, Term Life Insurance, Whole Life Insurance