What types of insurance does your 18 year old need as he or she heads off to the land of fraternity parties, political activist professors, all-night exam cram sessions, and sweating over final exams?
As our society and government stretches childhood from 18 years old to the mid-twenties, parents have to make certain important financial bases are covered for their kids and nothing ranks higher than insurance.
1. Car Insurance
It’s isn’t a matter of IF, it’s a matter of WHEN. Car insurance is cheap when compared to a $3,992 bill to fix a beautiful ten year old Nissan Pathfinder that “accidentally bumped” into a solid brick mailbox.
Not only are teens involved in more fatal car accidents, but involved in more accidents altogether. According to Census Bureau statistics, drivers under the age of 22 accounted for 29.4% of all car accidents despite being only 13.4% of the driving population. Based on crashes of all severities, the crash rate per mile driven for teens is four times the risk for drivers 20 and older.
Make sure your college bound teen has adequate car insurance and the proper insurance cards in the glove box at all times.
Sources for car insurance:
2. Health Insurance
While college students are now allowed to stay on their parent’s health insurance program, in a few years children adults up to age 26 will be allowed to stay on their parent’s health plan. For those students who’s parents have no health insurance, many colleges will automatically enroll students in the college’s health insurance program. Way back when I was in college, the university’s student health center was a good one.
Sources for health insurance:
3. Renters Insurance
No matter which of the three major housing options you and your student choose (campus dorm, off campus apartment, house or condo), your student needs to have renters insurance on his or her belongings to cover fire, water damage, or theft. You may be able to add their belongings to your own homeowners insurance policy should they elect the dormitory option but make certain you list expensive items on a separate schedule and insure them appropriately. Those items could include jewelry, expensive cameras, computer equipment, or a fancy bicycle.
Should you house your teenage student in a house or condo, you’ll obviously need insurance for that structure, but also be certain to include insurance to cover injured persons and possibly “loss of use” should you have to file a claim.
Sources for renter’s insurance:
4. Life Insurance
Most personal finance blogs, “experts,” and counselors don’t recommend life insurance on a college bound student, but they haven’t experienced the loss of a 21 year old and the ensuing financial disaster from even the simplest of circumstances following a students untimely death. They mistakenly believe that if no one is dependent on the student’s income, no life insurance is needed. But you’re insuring far more than just income.
Funerals aren’t cheap (the average one costs over $7,000), and final expenses can easily mount up quickly. Chances are very good that a parent will have to take some time off from work and there may also be the need for counseling following such a tragic event. If the student was in debt, there will be people calling your home wanting to talk to the deceased about repayment, then demanding death certificates and wanting to know how to file a claim against the estate. Are you prepared for that?
I’ve seen 10 year level term policies on non-smoking 18 year old males as low as $7.18 per month for a $100,000 death benefit and while no one wishes to make money from a child’s death, those funds will certainly help settle any final expenses and clean things up a bit for the parents. For the price of a sandwich each month, that’s a lot of peace of mind.
What happens if you don’t use the insurance? You can transfer ownership over to the student without him or her having to prove insurability (in most cases) and let them maintain their own life insurance once they graduate. For me, it just makes good sense and that’s why I’ve had life insurance on ALL my three children since they were 2 months old. If after settling your students final affairs there is a large sum remaining, you can always donate it to their favorite cause or hold it to help fund another child’s education as a memorial to their older sibling.
Sources for life insurance:
- USAA Life Insurance Companies
- InsureMe (they’ll shop multiple insurers for you, sort of like LendingTree does for mortgages)
Finally, involve your student in the decisions regarding insurance. At some point in their future, they will have to make these decisions on their own and possibly for their own children. Preparing them now is just responsible parenting.
Photo by mosesxan