Most people do not consider college loan life insurance for their children with life insurance when they head off to college. College is supposed to be a time of growth, education, and a time for young men and women to mature into responsible adults. Many adults also attend college later in life to upgrade their education and skill set.
Unfortunately, life does not go as planned, tragedy strikes, and a college student dies in the prime of their life.
Maybe they did something dumb. Maybe somebody else did something dumb. Maybe it was just a freak accident. Maybe it was an unknown health problem that suddenly became a life ending event. We do not know what tomorrow holds, and accidents happen.
In cases like these, college student life insurance protects your spouse, son, daughter, or grandchild before they head off to college.
Do all college students need college life insurance?
Does a college student need life insurance? Should a college student purchase life insurance? Should you be saving for college life insurance?
As a rule, no…but maybe they should! Let’s review information to help clear this up for you.
College life insurance plans and life insurance policies for college students are typically purchased to protect another person financially. If your college student has no debt, and no short-term future obligations for the next 4 to 6 years, then they do not need college loan life insurance protection.
Why would a college student need college loan life insurance?
If your college student will accept any private education tuition loans for which you would be the cosigner (which is likely), you will want to purchase college tuition life insurance protection for your college student.
This will protect you if your college student dies unexpectedly. If this happened, you, as the cosigner, would be responsible for paying the remainder of the college loan balance.
Usually, if you have government loans, these will not need to be repaid. Some private loans also have a “death clause” written into the loan that would eliminate the need to pay back the loan if a college student died.
Read all the loan paperwork before you sign to understand what happens to your loan when a death occurs.
When is the best time to buy life insurance for college students?
Perhaps, the best time to consider life insurance for a college education is before your son, daughter, or grandchildren turns 18 years old. The best time to purchase life insurance to cover college loans is before your child is legally considered an adult.
Why 18 years old? Life insurance policies for children under 18 years old are ridiculously affordable. There are often no health questionnaires on these insurance applications. If there are questions, they are very limited and should not interfere with your child’s ability to get life insurance.
These child life insurance policies guarantee your child will be insured in most cases, and the cost is about $8-$10 a month. These policies will give them guaranteed insurability for their entire life (if they keep this policy after they graduate from college).
What would be the best college loan life insurance policy for my children, or grandchildren?
If your children are under 18, there are many great life insurance companies that offer policies that will cost you less than a couple of cups of coffee a month.
If your child is over 18, a college student term life insurance policy will be a great fit.
What length of time do I want the life insurance to last?
This question can be a hard question to answer, since you may not have a clear idea how long until the loan is paid off. You want to make sure life insurance for college students covers enough time to pay the loan. For most families, this will be a 10 to 15-year timeframe.
Remember, if you purchase a 10-year college loan life insurance, and your student only takes seven years to pay the loan, you can stop making payments to the insurance company, and the life insurance policy will terminate immediately; you would then have no other life insurance financial obligations.
Life insurance on college students makes sense if you are a co-singer on their loan!
What are some other alternative insurance plans for college students?
If you invest earlier in your child’s life, then an Indexed Universal Life (IUL) insurance policy may be a great fit. A great argument can be made that an IUL is a better financial investment tool than a 529 program.
529 vs. IUL – why would a parent favor an IUL over a 529?
Safety is perhaps the #1 reason someone would look at an IUL over a 529 account. 529 accounts are invested in the stock market and will be decimated in severe market downturns. With an IUL, your balance will never fall below a 0% interest rate…cool, huh?
An IUL also has a life insurance component, whereas a 529 does not. IULs can also be used to take out cash free loans throughout the life of the insurance policy. IUL funds can be used for expenses other than college expenses, whereas a 529 can only be used for college expenses.
Life insurance and college financial aid – IULs also do not factor into the parent’s income for college aid eligibility. The funds in a 529 plan factor into your child’s eligibility to get financial aid. This may limit the financial aid your child can qualify for in the future.
IULs are good for students who will have lots of student debt because of the life insurance component within an IUL (if structured properly).
Why else would I want to insure a child or grandchild before they travel off to college?
When a college-age child heads to school, the parents are often in their highest income earning years. To be saddled with $25,000 to $100,000 unexpected debt, should your child die unexpectedly, will be a devastating financial event for the parents.
Grandparents, if you are co-signing for loans for your grandchildren, then you are placing yourself at great financial risk should your grandchild die unexpectedly.
It would be a crippling economic event for your family if you entered your retirement years with an unexpected $25,000 to $100,000 in student loan debt that must be repaid.
What is the best life insurance for college students and what kind of life insurance plans do college students qualify for?
Term life insurance for college students, whole life insurance for college students, universal life insurance for college students, and guaranteed issue insurance for college students are available.
Your choice will depend on your student’s financial needs and any other underlying health conditions. We can help you understand what your best options are and what will be the best fit for your level of impairment.
From a parent’s or grandparent’s financial point of view, there is no benefit to co-signing a student loan. Doing this results in an unsecured debt obligation that must be repaid should your college student’s life take a tragic, unexpected turn.
It is a loving thing to co-sign a loan for your child or grandchild. You are accepting somebody else’s financial obligation if they cannot repay the loan. It is a financial obligation that will have life-changing financial implications when tragedy strikes. This is where an affordable college loan life insurance policy will benefit you as a loan co-signer!