Buying life insurance for your college student

Purchasing life insurance for college students may appear unusual because the majority of college students do not have dependents who rely on their income. However, if your adult child has student loan debt, purchasing life insurance while they are still in college may make sense. In fact, any financial responsibility you've assumed in conjunction with your college student may leave you with financial ramifications if the unthinkable occurs and your college student dies.

StrongInsurance is here to help you decide if life insurance is right for your college student, what kind of policy and how much coverage you should get, and how to get started.

Why would you buy life insurance for your college student?

If you share financial responsibility for certain debts with your college-aged child, you may be liable for the remaining balance if your child dies. Even if you and your child take out the best private student loans available, this debt could be detrimental if either you or your child dies prematurely. If the student or cosigner died, private student loan companies could demand that the entire loan amount be paid in full right away.

Aside from student loans, college students may have other debts. When considering life insurance, consider whether you and your child have any of the following debts:

• Cosigning mortgages: If you cosign a mortgage with your child and your child dies, leaving you unable to make payments, the lender may pursue you. This could put you in a difficult financial situation if your child dies without any assets.
• Cosigning car loans: Just like a mortgage, if your child dies with an auto loan payment in their name, you may find yourself financially responsible for the debt or face having the vehicle repossessed.
• Joint cardholders on credit cards: If you cosign on a credit card for your college student, you both share financial responsibility for any debt incurred. This shouldn't be an issue if your child makes their monthly payments on time, but if they have a balance when they die, a life insurance policy could protect you from having to pay that debt out of pocket.
• Student debt: On average, Americans have more student loan debt than credit card debt. $1.7 trillion in student loan debt across 42.9 million borrowers equates to an average balance of about $39,797 in private and federal student loan debt per student loan borrower. While parents won't cosign on most federal student loans and are not obligated to repay them if their child graduates, private student loans are a different story. A cosigner is required by many private lenders, and approximately 93 percent of private student loans are cosigned. If the borrower dies, the cosigner is responsible for repaying the debt, which can happen quickly.

What kind of student loans could make life insurance helpful?

Hanneh Bareham, StrongInsurance student loan expert, explains which loans could leave the borrower and cosigner vulnerable if one of the parties dies.

• "While most student loans can be discharged due to death if the surviving family provides proper documentation, such as a death certificate, not all private student loan lenders provide this option." It is up to each individual lender and the terms of the loan to determine whether or not the surviving family will be responsible for the remaining balance.
• For example, if you were a co-signer on your child's loan, you may be obligated to repay the loan balance if they die. However, if there is a death in the family and the proper documentation is provided, federal student loans, including parent PLUS loans, will be discharged."

The prospect of your college student's entire student loan balance becoming due upon their death may cause financial hardship. If you cosigned on a private student loan for your child, you should consider purchasing a life insurance policy for yourself. If you are concerned about your ability to repay private student loans all at once, you may want to consider purchasing a life insurance policy for your college student. Overall, if private student loans are factored in, it may be prudent to consider purchasing life insurance for yourself and your child.

What kind of life insurance is recommended for college students?

Because it covers the insured for a set period of time, usually between five and thirty years, term life insurance may be a good fit for college students. Maintaining a term policy while still paying off private student loans may be financially prudent. After the term policy expires, you will no longer receive a death benefit and will no longer be required to pay premiums (unless you opt to convert the policy to a permanent life policy). If you're thinking about getting a term policy, you might be wondering, "How much does life insurance cost?" Premiums vary according to age and health, but term life insurance is typically much less expensive than permanent life insurance.

If you are a parent who does not want to purchase a separate life insurance policy for your child, some insurers may allow you to add a child rider to your existing policy that will cover your college student. Child riders typically have lower limits than separate policies, but if your child does not have much debt, it may be a viable option.

Another option for college students is whole life insurance. Whole life policies include cash value accounts that can be used for savings or investment. Whole life policies, on the other hand, are typically much more expensive than term policies, and many states limit whole coverage to applicants 45 and older.

How do you buy life insurance for your college student?

You will need your college student's permission before purchasing a policy on their behalf. You'll also need to demonstrate an insurable interest, which means you'd suffer a financial loss if your child died. Your cosigned loan documents should suffice to demonstrate insurable interest. Here is how to get a life insurance policy for your child:

1. Determine how much coverage you need. You could base this on the amount of debt your child owes and the estimated number of years it will take to repay. A life insurance calculator can assist you in determining how much coverage you require.
2. Consider adding a child rider to your policy. If you want to add a child rider to your own life insurance policy but your current life insurance company does not offer one for college students, you should consider switching.
3. Compare quotes from different insurers. You could begin by researching the largest life insurance companies, or you could try one of the new financial technology startups that offer an entirely online process. Obtaining a few quotes can assist you in locating the best rate for your child, though premiums should not differ significantly between similar policy types and features.
4. Fill out the application. You'll probably need to sit down with your child to do this because you'll need specific health information from them.
5. Schedule a medical exam. This step is not always required; some companies have no-exam policies. If you do need to schedule an exam, make sure to consult with your agent or insurance company first. Some companies have preferred vendors, and the carrier may even arrange for a nurse to visit you at home.
6. Sign the policy. After the policy is approved, you must sign it and make the first payment.
7. Pay the premium. For life insurance, most businesses offer monthly payment plans. You should think about setting up automatic payments. You may be able to pay the premium in quarterly, semi-annual, or annual installments. If you do not pay your premium on time, your policy will lapse and your coverage will end.

Frequently asked questions

Should college students get their own life insurance?

If you want your college student to learn about insurance and financial responsibility, having them buy their own policy and name you (or the cosigner on their debts) as the beneficiary could be an excellent learning experience. If your child has their own life insurance policy, they must pay the premium in order for the policy to remain active. You may want to purchase the policy yourself if you prefer to personally ensure that the policy does not lapse and that you have the protection you require as a cosigner.

Can a child rider be converted to a whole life policy later on?

Potentially. Many life insurance companies allow you to convert a child rider to a whole life policy for your child once he or she reaches the age of maturity (when the rider is scheduled to expire). The insurer may limit the face value of your whole life policy based on the amount of coverage you had for the rider. For instance, if you have $10,000 in coverage through a child rider, your insurance company may only allow you to convert to a whole life policy worth up to five times that amount. If that is insufficient coverage for your child as they grow, you may want to purchase a separate policy for them from the start.

What kinds of insurance should I purchase for my college student?

Life insurance is an optional purchase, but it is critical if you and your child share debts. Other types of insurance are also necessary. Almost every state requires car insurance. If your child drives, they should be listed on your policy or have their own policy, depending on who owns their vehicle and where they live. The best car insurance companies on the market provide a variety of coverage options from which to choose.

If your child does not live in school-provided housing, renters insurance may be an important part of their financial well-being while in college. A renters policy covers your child's belongings in their apartment or rented home while they are at college, as well as liability coverage in the event that someone is injured or your child damages someone else's property. If you're thinking about getting renters insurance, you should look into the best renters insurance companies available.