Life insurance is an essential part of every financial plan. The hardest part is determining the best time to purchase it and the type of coverage to consider. We will discuss if this should be on a college student’s radar and what to look for and avoid.

College students generally don’t need life insurance, but there can be exceptions. Students with cosigned loans taken before November 20, 2018, should consider purchasing a policy and those concerned about future insurability or other financial obligations.

Which college students should consider purchasing life insurance?

• Students with a cosigner on loans before 2018 or other loans that won’t discharge the loan in case of death. In short, if your lender won’t discharge the loan, you should get a term life insurance policy to cover it.
• Future insurability – Some clients find it gives them peace of mind to provide some future insurability. By purchasing a policy at a young and healthy age, you can get a very inexpensive policy that can stay with you for up to 30 years.
• You have dependents or others depending on your income for basic needs – If you fit these criteria, you should consider purchasing a low-cost term life insurance policy.
• Living benefits – If you are concerned about financial obligations if you become chronically or critically ill, some policies pay a benefit immediately so you can continue paying your bills. This is also what disability insurance policies are designed for, but it can be harder to purchase with low income or your occupation. A term life policy with living benefits can help with this.

Which college students should not consider purchasing life insurance?

• Students with loans after November 2018 – Most students who took a loan out with a cosigner may have concerns about what will happen to the loan if something happens to them. A law that solved this potential issue was passed in 2018, requiring lenders to discharge the loan in case of death. Because of this, a policy is likely not needed to cover the loan obligation. Double-check with your lender to confirm.
• College students being pitched “investments†– young adults and college students are often pitched whole life, variable life, indexed universal life products to save for the future, and a retirement plan. While there can be exceptions, I don’t suggest any student purchases a policy for these reasons without first speaking with a CFP.
• Students with no other financial obligations – If you have no dependents counting on you for income or business obligations, considering a policy probably doesn’t make sense.

How much does life insurance cost for a college student in NJ?

Like most things, it depends, but here are some sample prices for a typical term life insurance policy with living benefits.

• Male – Age 20
  • $250,000
  • Age 20
  • 10-year term $11.52 per month
  • 30-year term $20.68 per month

• Female – Age 20
  • $250,000
  • Age 20
  • 10-year term $10.58 per month
  • 30-year term $17.16 per month

 

What is the process for purchasing a term life insurance policy in NJ?

If you think it makes sense to purchase a policy, the process is quick and easy for most college students. If you are working with Glenn Insurance, we will collect a few pieces of information to get started.

From there, the insurance company will ask you to complete a short online application and possibly have a phone interview. For a relatively healthy student who has no significant health history, the policy will be approved within a few days.

For those with past health issues, insurance carriers may request doctors’ records and order a physical examination. This is all at no cost to you and is how they can assess your insurability. Once complete, they will let you know under what terms they can offer a policy.

Depending on what is needed, it can range from a few days to a few weeks, depending on what the underwriters require.

Other resources

For more information on whether life insurance makes sense for your situation, contact Mike Sheeran at msheeran@glenninsurance.com.

For more research on your own, Life Happens has great tools and articles on all things life insurance; It can be found at LifeHappens.org.