Regardless if you are aware or not, student loan debt has become a significant issue for almost all Americans.
The amount of debt doesn’t seem to be decreasing and more people are hoping their debt gets erased by the government.
But did you know:
That life insurance is the easiest way for a co-signer to protect themselves if the student dies.
This post will discuss if college students need life insurance, the reasons you should consider student life insurance, and how to find coverage fast.
Do College Students Need Life Insurance?
Yes, college students need life insurance. While they might not find insurance as an essential topic on their list of things to get done, it’s very crucial for them to have.
Student loan debt, protecting their dependents, and protecting parents from a substantial financial burden are great reasons students should get covered.
Below we review those reasons in more detail.
3 Reasons To Consider Student Life Insurance
The average student loan debt per borrower is over $30,000. Because of this, obtaining some type of student loan insurance is super important.
Unlike federal student loans, private student loan debt will not cancel if the student dies before paying the loan off.
Private student loans almost always require some type of co-signer, who will be held responsible for paying off the loan if the student dies while in school.
There is even a possibility that the lender will request immediate payment-in-full if the student dies.
Getting a life insurance policy that will more than cover the college term (10 years) and enough coverage to cover the loan amount will protect any co-signer on a student loan.
It Protects The Parents
There are multiple ways a parent can fund their child’s education, such as a personal loan, a home equity loan, or a 401k.
If the student dies before they can pay off their debt, their parents will still be responsible and could lose their home or ruin their credit.
No one likes to pay for something they won’t ever use (except for gym memberships), so there really isn’t a reason to go without life insurance for your student.
To Protect Your Dependents
One thing most people don’t consider is the fact that some college students have kids and need to protect their well being.
It doesn’t matter if you are single or married; if you are a student and have any dependents, you need life insurance.
Life insurance would protect your spouse and dependents by paying off the student loan debt, covering any final expenses, and providing the family with financial stability.
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How To Buy Life Insurance For A College Student
Determine Who Should Own The Policy
The first thing we need to figure out is who should be the policy owner, the parent, or the student?
The policy owner plays a crucial role because they are the only people who can make changes to the policy. They can do things like change premium due dates, remove or add beneficiaries, and cancel the policy.
Who should own the policy is going to depend on:
A student should own their own policy if they have dependents or a spouse.
However, if they are single and still able to go on their parent’s policy, that might be the best option.
If your parent has co-signed student loan debt, they might want to be the policy owner because only the owner can make changes to the policy.
Calculate How Much Coverage The Student Will Need
- As a parent, if you will be the insurance policy owner, it’s crucial that you get enough coverage to cover the total student loan and choose a reasonable term length (at least 10 years.) This will ensure that your child is actually protected for the length of time they could be in school.
- As a student, if you will be the owner of your own policy, it’s best to consider current or future situations. If you are married or have dependents, be sure you get enough life insurance to cover your student loan debt and protect your family for at least 10 to 20 years. This is usually calculated by multiplying your annual income by 10, 15, or 20. The industry standard is 10X your income, but I always recommend up to 20x your annual salary if you can afford it.
Get A Few Anonymous Quotes & Comparison Shop
Once you guys understand who will own the policy, how much coverage you will need, and for how long, it's time to start comparison shopping.
It's effortless to get life insurance quotes online; however, be sure that you are giving the least amount of information while you are in the quote stage. You just need an idea of what your pricing could be, and you don't need to get called by 1000 agents just because you want to look at pricing.
Be sure you compare apples to apples; the policies’ term lengths and coverage amounts should be the same. Once that matches, it's time to look at the policy's benefits and features by checking out some reviews.
Read Reviews To Find The Best Life Insurance Company
Once you have some rates from the top competitors, it will be time to read reviews about the company.
These should be customer reviews and product reviews like this that details a specific company and its product.
Doing this step educates you more on the product and allows you to get a better idea of additional features that might be offered with your product.
For example, some companies include an accelerated death benefit with their policies, while others may charge extra for it.
Once you have completed the process and found at least 2 top companies, it's time to apply for coverage.
Remember, you or your student still needs to be approved. You can usually get an immediate decision or instant approval life insurance policy online.
Once you submit the application and the policy is approved, your final step will be to set up automatic payments.
Should You Use Life Insurance To Pay For College?
Suppose you have received life insurance proceeds as a surviving spouse or through an inheritance. In that case, paying for a student’s college or your own college may be a solid idea.
The best thing about life insurance is that 98% of the time, it’s going to be tax-free, and it gets to avoid probate court.
Once you receive the funds, there isn’t any limitation on how the funds can be used. If you are trying to avoid taking on additional debt, then the funds from life insurance could work.
However, according to several personal finance experts, it’s essential to have a plan before you start investing your life insurance proceeds.
INSURANCE WHERE YOU LIVE
Life insurance by state.
If you are a parent and have decided to help your college student take on student loans, having a life insurance policy on them is a no-brainer.
However, a student with dependents or a spouse may find it best to have a policy of their own.
Either way, there isn’t any reason to wait around to get covered; you can click here or on any of the above buttons to get the process started.
Frequently Asked Questions
Does a college student need life insurance?
Yes, life insurance is essential for college students because it allows parents to cover outstanding debts if they die. Most families have to take out loans to cover their student’s education. It’s best to be financially protected when deciding to be a co-signer on any type of debt.
How much is insurance for college students?
The average age of a college student is 26 years old. Considering that, the average college student can get a 10 year $250,000 term life insurance policy for less than $12.00 per month.
How do I get insurance while in college?
The best way to get life insurance while in college is to get added to your parent’s plan (if you are 18 or under) or just purchase your own policy online if you are over 18. Several companies offer instant issue life insurance.