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Life insurance for college students
It may be the last thing on your mind, but life insurance is a smart move if you have student loans or dependents.
Your college years are very much about living in the “now.” But if you have student loans, aging parents or people who financially depend on you, life insurance can protect your family if something happens to you. And similarly, if you’re a parent who’s cosigned a loan with your college-age child, a life insurance policy can prevent you from ending up in debt if the unthinkable happens.
Can I get life insurance as a college student?
Yes. You can purchase a policy if you’re at least 18 years old and can afford to pay the premiums.
5 reasons to consider life insurance as a college student
If you have financial obligations or loved ones who rely on your income, you might want to think about buying life insurance. For college students, these are the most common reasons to buy life insurance:
You have student loans
If you have student loans, you’re far from alone. Around two in three college seniors who graduated from public and private nonprofit colleges in 2017 had student loan debt, according to the Institute of College Access & Success. To pay for tuition, many college students apply for private loans with banks, credit unions or other lenders — and cosign with their parents.
If that’s your situation, and you die, your parents are liable for those loans. Sometimes, lenders accelerate the repayment schedule or require immediate payment in full, which can cause financial hardship for your cosigner. A life insurance policy can ease your parents’ financial burden and ensure they have the money to settle your student loan debt.
What about federal student loans?
Any debt you owe on government loans issued by the Department of Education is forgiven when you die. This means your parents or spouse won’t have to worry about paying the outstanding balance. However, if you have a Parent PLUS loan and you or your parent die, the canceled debt will be treated as taxable income. This means the surviving cosigner could be left with a large tax bill, which is one reason to consider buying life insurance to help bridge the gap.
Private loans need to be repaid. If you don’t have a cosigner, the lender looks to your estate for the money.
You’re married and have kids
Life insurance is designed to protect your loved ones when you’re gone, so if you’re married or a parent, consider buying coverage.
Your situation isn’t unusual. Over 25% of undergraduates are married, and more than one in five college students are parents, according to the Institute for Women’s Policy Research. A life insurance policy can provide peace of mind.
You have a mortgage, car loan, credit card or other outstanding debt
Your debt doesn’t die with you. If you have balances left on your debts, a life insurance policy can take care of the repayments if you pass away prematurely. It will also help your parents or cosigners — if you have any — to keep their credit scores in check.
You take care of your parents
If you’re the primary caregiver for aging parents, it’s worth looking into life insurance. That way, your parents have the money to hire a caregiver in the event of your death. On a similar note, if you’re financially responsible for your parents, a life insurance policy can leave them with the funds to pay for care, living and medical expenses if you die.
You can get cheaper rates
One of the major benefits of buying life insurance in college is that you can lock in a good rate. Insurers reserve their best rates for young, healthy applicants. For example, a healthy, nonsmoking 20-year-old might pay just $13.76 per month for a $250,000, 20-year term life policy.
The same goes for mature-age students. Apply for life insurance as soon as you identify a need for it, because the price increases as you age.
How to buy life insurance as a college student
When you’re ready to purchase a policy, follow these steps:
- Choose a policy and coverage amount. Decide between term life and permanent life insurance, and calculate how much coverage you need. An easy way to do this is to add up your financial obligations and debts plus interest, and take out a policy to match. If you’re simply taking out a policy to cover your student loans, consider the loan balance plus interest, and how long it will take you to repay the loan. Let’s say you have a $15,000, 10-year loan at 8% interest per year. At the end of the term, you would have paid $21,838.97 — so be sure to take the full loan amount into account.
- Determine your budget. If you fail to pay your premiums, your life insurance provider can pull your coverage, leaving you uninsured. Life insurance is an investment, so be sure to buy a policy you can afford. You can always purchase more coverage later.
- Compare insurers, premiums and policy features. To make sure you’re getting a policy at the best possible price, get quotes from a range of companies. While you’re researching, read the fine print so you know what you’ll be covered for.
- Apply for coverage. Once you find a policy that suits your budget and needs, fill out the application. The approval time varies between providers and policy types. Traditionally underwritten policies take three to eight weeks, while no-medical exam policies can be issued within hours, and tend to be more expensive.
What type of policy should I consider?
For most college students, term life insurance is the best choice. It’s the simplest and cheapest policy, and it offers coverage for a set period of time. As the policyholder, you can choose a term length that meets your needs. Say you crunch the numbers and figure out it will take you 20 years to pay off your student loan debt, you can purchase a 20-year policy.
Look for a term life policy with a convertibility feature. This allows you to upgrade to a permanent policy within a certain time frame.
How much does life insurance cost for a college student?
The cost a policy comes down to a range of factors, including your age, health, lifestyle, smoking status, and how much coverage you’re buying. But as a young, healthy college student, you can likely purchase $250,000 or $500,000 worth of coverage for under $20 a month.
I’m a parent. Can I buy a policy for my college-age kid?
Yes, on two conditions. First, you’ll need to prove that you’d be financially burdened if your child passed away. This is known as “insurable interest,” and a cosigned loan counts. Second, your child will need to consent to the policy and sign the paperwork. You can’t buy a policy for someone else without their knowledge.
As for when to buy coverage, aim to purchase a policy as soon as you secure the cosigned loan. That way, you’ll be protected financially should something happen to your child.
Compare life insurance companies
Reach beyond our top five to find the best fit for your goals and budget.
Life insurance for college graduates
The same principles apply here. If you have dependents or outstanding debt to your name, a life insurance policy can protect your loved ones financially in the event of premature death.
Unfortunately, student loan debt is a reality for most college graduates. Depending on your degree, you might have tens or even hundreds of thousands of student loan debt to deal with. The type of loan you have may influence whether you buy life insurance and how much coverage you need:
- Federal student loans are forgiven if you die before paying them off. This includes Direct Subsidized Loans, Direct Unsubsidized Loans, Direct Consolidation Loans and Federal Perkins Loans.
- ParentPLUS loans is forgiven if the student or parent borrower dies. But if both parents are named as borrowers, the surviving parent is responsible for repaying the loan.
- Private student loans aren’t typically forgiven. The debt will most likely be passed on to your cosigner if you pass away, or your spouse if you live in a community property state. A life insurance policy can help your cosigner or spouse to make timely repayments on your student loans.
As a college student, life insurance might not have crossed your mind. But if you have student loan debt or people that rely on you financially, you might want to take out a policy. Insurers reserve their best rates for young, healthy applicants — so you’re in a good position to get coverage, but compare life insurance companies to save on your policy.
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