5 Reasons Why College Students Should Invest In Life Insurance
We tend to think of life insurance policies as being designed for older people or those in poor health. They may have dependent loved ones, and a life insurance policy is a great way to protect those loved ones.
College students are a very different demographic, but they also benefit from a good life insurance policy. Keep reading to discover just a few of the reasons why this policy can be so beneficial.
1. Student Loan Debt
One of the primary motivations of getting life insurance is to pay off any remaining debts after death. And for college students, the largest potential debt they are likely to have is student loan debt.
Depending on the student loan type, their death may not automatically discharge the debt. And that means debt (potentially quite a bit of debt) ends up getting passed to the parents instead.
However, a student can take out a very affordable life insurance policy to prevent this from happening. The student needs to make sure the policy’s death benefit meets or exceeds how much they owe. Additionally, parents can proactively take out a policy on their own children as a way of protecting themselves from this massive debt. An affordable option is term life insurance.
Student Loans: Read the Fine Print
Earlier, we mentioned that the type of loan a student has determines whether or not the debt discharges upon death. Knowing which loans discharge upon death and which do not can help students and parents make life insurance decisions while also affecting the financial aid they take out.
Let’s start with the good news: federal loans (including Stafford loans) discharge their debt upon the borrower’s death. So if a student only has these types of loans, they will not pass on any debt upon their death. The debt is also discharged for Parent Plus loans, but the government may treat the canceled debt as income for the parents and then tax it accordingly.
Now here’s the bad news: by definition, nonfederal and private loans are not subject to any kind of governmental regulation. That means these institutions can determine their own rules for whether debt is discharged upon death or not. Parents are most likely to be on the hook for this debt if they cosigned one of these loans and the student later died.
Because this debt can be sizeable, more students are looking into life insurance as a way of protecting others from their debts. After all, the average college student graduates with nearly $30,000 in debt!
2. Automobile Loans
While student loans are the primary debt that a student can pass on, they aren’t the only kind of debt. And aside from that financial aid, one of the most significant kinds of debt a student can pass on is an automobile loan.
Due to their young age, many traditional college students get their parents to cosign on a car loan. And then, if that student should die, the cosigner is responsible for the remaining debt.
In that case, the cosigner may be stuck with many years of paying off a car they didn’t need in the first place. But if the student gets a good life insurance policy, they can rest assured nobody will be stuck paying for their wheels after death! We mostly recommend term life insurance as protection in this case because whole life insurance is such a long commitment.
In addition to life insurance, it is important that the car be protected with a good auto insurance plan as well.
3. Cosigned Mortgages
While this is relatively rare, some parents cosign on a home with their children when those children go to college. Usually, they are motivated by the fact that a modest mortgage payment will be more affordable than the rent in the area (and definitely more affordable than the dorms). And after the children graduate, the homeowners can always rent the home out, especially for football games.
However, all it takes is the death of the student to leave the cosigner with an expensive mortgage and no help making monthly payments. Sure, the cosigner can always sell the home, but that may take many months (if not longer). And trying to give the home back to the bank could end up wrecking the cosigner’s credit.
Fortunately, a life insurance policy can make sure the survivor is financially covered and can afford to sell the home on their own terms without any major pressure. And while researching life insurance for college students, parents should consider long-term care insurance for themselves.
4. Credit Card Debt
Many college students are using credit cards for the very first time. And because their credit is so young, a large percentage of these students have their parents as cosigners on this card.
Once again, cosigners will be left holding the debt if the other party passes away. And if the student has been putting college expenses on the card (ranging from gasoline to textbooks), it can drive the debt quite high.
But with a life insurance policy in place, students won’t have to worry about financially inconveniencing their parents or anyone else.
5. Expect the Unexpected
Taking out a life insurance policy for a college student may feel pretty weird at first. After all, the average college student is young and healthy, not exactly the kind of person who normally needs life insurance coverage.
However, life insurance isn’t here to protect people against only the threats they are expecting. It is mostly here to protect against the other threats that nobody ever expects.
Tragically, it is very easy for a college student to die on the way to campus or while driving back home. Some students are even fatally struck by cars as they walk to and from college campuses. And some young people in apparently perfect health may be suffering from illnesses that aren’t diagnosed yet.
Get the Best Life Insurance for YOU
Are you a college student seeking life insurance? Or the parent of a college student exploring life insurance options? Either way, it’s possible to get amazing coverage at the click of a button!
Here at InsureOne, we make it very easy for you to get a quote online. You can also grab the phone and give us a call at 800-836-2240. Finally, feel free to come into one of our offices near you today!