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As a parent, would you be paying off your child’s student debt should they pass away? Does your son or daughter away at university have children or a life partner? Life insurance can financially protect parents and their child’s dependents should your child have a premature death.
Parents should look at their own financial responsibilities and the financial responsibilities of their child (children) away at university or college when deciding to get life insurance.
How life insurance can benefit university and college students
Pay off student loans: Students in college or university can rely on their parents for financial support and/or are using student loans to finance their post-secondary education. They may also have a line of credit, for which their parents may have been co-signers.
A term life insurance policy can be used to pay off student loan debts. Term life insurance policies last for a set period of time, such as 10 or 20 years. You can choose a term length that matches the length of the student loan.
This type of policy could also be used to pay off a car loan or credit card.
Protect dependents: If your child away at school and has a life partner and/or children, life insurance provides financial protection for them in the event of the student’s death.
It can provide money for the surviving dependents and to pay off any debts.
Insurability in the future: Buying life insurance as a post-secondary student while young and healthy can lock in lower premium rates. It can ensure coverage even if the student later develops a health condition that might make it more difficult or expensive to obtain a life insurance policy.
What kind of life insurance should university and college students get?
Term life insurance: Term life insurance is usually recommended for post-secondary students. Term life insurance policies typically offer lower premiums compared to permanent life insurance policies. A medical exam is usually not required.
A term insurance policy expires after a pre-determined number of years, usually 10, 15, 20, or 30.
You will choose the length of the policy and also select the amount of the death benefit, which is the tax-free amount for the beneficiary, or beneficiaries, should the student pass away.
Since it lasts for a set period of time, term life is more affordable for university or college students than permanent life insurance, but it still offers similar payout amounts.
But what about permanent life insurance?
Should you and your parents decide on permanent life insurance, it covers you for your entire life and not only when you are a student. In most cases, your premiums are guaranteed to stay the same during your life, but it is more expensive than term insurance. It may or may not fit into your budget or your parent’s budget.
If you get permanent life insurance as a student, you don’t need to renew it because it doesn’t expire while you are living. Your coverage is lifelong.
Permanent life insurance offers a tax-free death benefit along with a savings account. If you choose permanent life insurance, you are agreeing to pay a certain amount in premiums on a regular basis for a specific death benefit. Permanent life insurance usually pays dividends, allowing the savings aspect of your policy to grow over the years.
How much life insurance coverage should be purchased for university/ college students?
Typically, life insurance for a university or college student should cover:
For a post-secondary student who doesn't have any income or children, you would estimate the expected future salary that would be earned after graduation and multiply it by 12.
Reasons why students and parents may not consider life insurance
Cost: The cost of life insurance may put an extra strain on family and student finances.
Priority: It’s not considered a financial priority for young and healthy students.
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