You’ve kissed classes goodbye and grabbed that sheepskin. Now what?
If you want to save some money and protect what you’ve got (along with what you’ll soon be earning), it’s time to think insurance.
You don’t have to spend a bundle. Just putting a few bucks on the right kind of coverage can make a big difference in your life. And, with some jobs, it’s just a matter of checking the right box on the benefits form. (To compare insurance policies and quotes, visit Insureme.com, a Bankrate company.)
Here are a few tips to keep in mind as you plan your post-college life.
Everybody needs health insurance. Most employers will cover part or all of your premiums, says Bill Feldhaus, associate professor of risk management and insurance at Georgia State University. Even if you have to contribute a little (or even a lot), this is one kind of insurance you don’t want to forgo. Medical treatment can be expensive, and an accident or unexpected illness could wipe you out financially.
One way to save: If you had been covered under your parents’ insurance, find out if you’re still eligible after you graduate. If you’re living at home, continuing with your education, or younger than a certain age, you may be able to remain on their policy. If having you on the policy costs them extra, compare that price to your other options. And if you want to use their coverage, pay the difference. If it means better coverage at a lower price, it could still be a good deal for you.
If you can’t continue coverage and your new job doesn’t offer health insurance (or you don’t yet have a full-time job), shop the rates on individual coverage. One easy way to start your search is with the company that’s been providing your health insurance up to now, usually a parent’s insurance company, says Jack Hungelmann, author of “Insurance for Dummies” and an agent and consultant with Corporate 4 Insurance Agency of Edina, Minn. Then look at its competitors.
If the quotes you’re getting seem too pricey and your health is good, consider a catastrophic plan paired with a health savings account, or HSA, says Feldhaus. The policy typically has a high deductible, but would cover big-ticket medical needs. The savings account lets you bank money tax-free to pay for smaller medical needs, as well as the premiums. So you can shave 15 percent to 30 percent (whatever the percentage of your personal income tax rate) from your medical care costs.
Pick up renters insurance. Unless you’re living at home — and your parents have a homeowners policy — you’re going to need something to cover your things in case there’s a fire or burglary. (Don’t think you own enough to make it worthwhile? Total up the cost of replacing your computer, MP3 player, cell phone, PDA, sound system, flat-screen TV and that collection of CDs and DVDs.)
Many renters mistakenly think that their landlord’s policy will cover their belongings. But the landlord’s policy protects only the landlord’s property — the building.
What you want is something called “renter’s” or “contents” insurance to cover your property. And it’s fairly cheap. For a few hundred dollars per year, you can get enough to cover everything. (And many companies will let you pay quarterly or monthly to soften the blow.) Look for replacement cost coverage. It will pay full price for new versions of lost or damaged items.
Want to make it easy to collect on a claim? Take digital photos or video footage of your belongings and store an extra copy online or at a physical location away from home (like a relative’s house), says Dick Luedke, spokesman for the State Farm Insurance Cos. That way, if you should ever have to file, you’ve got proof of ownership, plus a complete inventory.
You probably don’t need (much) life insurance. Life insurance is meant to replace lost income when a family member dies. If no one is depending on you as a breadwinner, you probably don’t need much.
Most jobs will supply a minimal policy, usually about one year’s salary, and that’s more than enough to cover burial expenses, says Hungelmann.
Use the Internet to find inexpensive insurance with a company that stands behind its customers.
“Your state insurance department and the National Association of Insurance Commissioners keep records of the numbers of complaints and will share the information,” says Bob Hunter, director of insurance for the Consumer Federation of America and former insurance commissioner for the state of Texas. “And the NAIC Web site has complaint ratios, so you can actually compare. The way I shop: Go online and look for five companies that are low for someone like me. Then I go to the NAIC site and look at the complaint ratio.” If a company has both low rates and low complaint ratio, says Hunter, “I will call for quotes.”
Purchase a healthy amount of liability coverage for your renter’s and auto policies. You might only own a few thousand dollars worth of goods. A total loss would be a hardship. But if you’re found liable in an accident, the tab could run into the hundreds of thousands of dollars to cover medical bills, pain and suffering, etc. And that kind of loss could destroy you financially.
“People have a tendency to buy insurance for the losses that will hurt them the least,” says Hungelmann. Instead, “put your money into the major loss areas,” he says.
And that means some decent liability coverage for home and auto. Luckily, the cost of that higher liability coverage is “marginal,” says Feldhaus.
Not worried because you’re not making much now? Someone who gets a judgment against you can hang onto it until you’re earning more, then garnish wages. And that’s a real concern for students entering or exiting law school or medical school, who can eventually anticipate six-figure salaries.
“People see it as an opportunity,” says Loretta Worters, vice president with the Insurance Information Institute, an industry organization.
In general, college grads are “not aware of how suable they are,” says Hungelmann
With your auto policy, make sure there’s at least $300,000 in liability coverage (and $500,000 is better), he says.
Another smart tip: Make sure the policy is written so that the per person coverage limit is the same as the per incident limit, says Hungelmann. Many policies will cover a set amount for one accident, but set much smaller limits for each person injured in that accident. If you have $300,000 in liability coverage, the policy might cap per person injuries at $100,000. So if another party’s hospital expenses total $200,000, instead of being covered, you’ll be hit with a bill for $100,000.
6. Set deductible limits
Think carefully about your deductible limits. The litmus test for setting deductibles is determining how vital the resource in question is (car, laptop, cell phone), how quickly would you need to replace it, and how hard would it be to lay your hands on the $100, $250, $500 or $1,000 in that time frame?
If you need the car to get to work and an extra $500 one week (or month) would put you in the poor house, then that $100 or $250 deductible is the way to go.
Whatever amount you set as a deductible, start saving, and bank an equal amount. That way, if you have a loss, you have your own personal insurance policy, too.
Take the free retirement money offered at work. Does your employer offer a retirement plan and match part of your contributions? Take the money and run, says Feldhaus.
Right after you’ve graduated, the last thing on your mind is retirement. But this is one insurance policy that will pay big dividends. Best of all, it’s all under your control.
If you can’t afford the max in the beginning, don’t worry about it. “The amount is not important,” says Feldhaus. “It’s developing some systematic approach to save for retirement. And this is one item I would certainly recommend.”
Dana Dratch is a freelance writer in Roswell, Ga.