For many, starting college is the start, at least symbolically, of their adult life. Students begin to access some of the many options of dealing with life in the “adult” world. Somewhat surprisingly, students also begin to ask if Life Insurance is something they should consider.
The Purpose of Life Insurance
Life insurance provides some financial security for family and loved ones after the insured dies. Typically life insurance provides for items like paying debts, funeral expenses, mortgage protection and protection for dependents.
This sort of protection really isn’t that important for young college students with no dependents.
Reasons for Students to Consider Life Insurance
Let’s look at some of the reasons that students should consider life insurance.
Student Loans– Federal Student loans are forgiven in the event of the student’s death. Some private student loans are also forgiven in the event of death. If the student loan required a co-signer, the loan debt falls on the co-signer. If the privately issued student loan is not forgiven due to death or if you have a co – signer, a term life insurance policy can cover the debt. Students should check the loan agreement for private loans. For loans with a co-signer the student should discuss purchasing a policy with the co-signer.
Elderly or Dependent Parents – If your parents are elderly and dependent on you for part of their support, then a term life policy may also be a wise investment. Parents can use the policy to cover funeral expenses and settle the estate. The policy will also provide support for the parents.
Married Students – Young married students should look at term life policies. If both are students, the benefits can pay for the education of the surviving spouse as well as funeral expenses and any debts left by the deceased partner.
Another Reason to Consider Life Insurance
Eventually most people require some type of life insurance protection. Young, healthy college students are in the best position to obtain life insurance at incredibly affordable rates. Life insurance rates increase as one ages and health conditions change.
Students can lock in very low rates for coverage that far exceeds their current needs.
Type of Policies
Students looking to the future and wishing to get a head start while it’s inexpensive should look at the different type of policies available.
Term Life – Term Life is the least expensive type of insurance. For a fixed premium, the insured is guaranteed a specific benefit. Term policies exist for a fixed period of time. At the end of the term, the insured has to find replacement coverage.
Whole Life – Whole life policies are more expensive but, as the name implies, provide protection for the life of the insured. Whole life policies also have financial benefits other than death payments. They build cash value and often pay dividends. Whole life policies have a wide range of benefits and options and are part of many estate planning tools. As is the case with term life policies, obtaining a whole life policy while young and healthy is less expensive than obtaining similar coverage later in life
So if planning for the future is part of your plan, spending some time with an insurance broker can give you some insight into your options.