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Buying life insurance for your college student

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Buying life insurance for college students may seem unusual since most college students don’t have dependents relying on their income. But if your adult child has student loan debt, buying life insurance while they’re in college could make sense. In fact, any financial responsibility you’ve taken on in conjunction with your college student could leave you with some monetary fallout if the unthinkable were to happen, and your college student were to pass away.

Bankrate is here to help you decide if life insurance is right for your college student, what kind of policy and how much coverage you might want to purchase, and how to get started choosing a policy.

Key takeaways
  • If your college-aged child passes away with debt, you may be responsible for paying it back. Life insurance could step in to pay the balance.
  • Adding a child life insurance rider to your own life insurance policy could provide coverage for your college student without purchasing a separate policy for them.
  • To calculate how much coverage you need, you may want to calculate the amount of debt your child has and the estimated number of years it will take for repayment.

Why would you buy life insurance for your college student?

If you share financial responsibility with your college-aged child for certain debts, you could be on the hook for the remaining balance if your child were to pass away. Even if you and your child take out private student loans with the best rates available, this debt could become detrimental if either you or your child passes away prematurely. If the student or cosigner were to pass away, private student loan companies could request the entire loan amount to be paid in full immediately.

College students may have other debts beyond student loans. When considering life insurance, you might want to ask yourself if you and your child share any of the following debts:

  • Cosigning mortgages: If you cosign a mortgage with your child and your child passes away, and is therefore unable to make the payments, the lender could pursue you. This could create a tough financial situation for you if your child passes away without any assets.
  • Cosigning car loans: Similarly to a mortgage, if your child passes away with an auto loan payment in their name, you could find yourself left financially responsible for the debt or face the possibility of the vehicle being repossessed.
  • Joint cardholders on credit cards: If you cosigned on a credit card for your college student, you both share financial responsibility of any debt accrued. This shouldn’t be a problem if your child keeps up with the monthly payments, but if they’re carrying a balance when they pass, a life insurance policy could protect you from taking on that debt out-of-pocket.
  • Student debt: Americans have more student loan debt on average than they do credit card debt. $1.7 trillion in student loan debt across a total of 42.9 million borrowers means an average balance of about $39,797 per student loan borrower in private and federal student loan debt. While parents can’t cosign on most federal student loans and aren’t responsible for repaying them if their child passes, private student loans are another matter. Many private lenders require a cosigner and about 93% of private student loans are cosigned. The cosigner is responsible for repaying the debt if the borrower passes, sometimes even all at once.

What kind of student loans could make life insurance helpful?

Below, Bankrate’s student loan expert, Hanneh Bareham, explains which loans could leave the borrower and cosigner vulnerable if one of the parties were to pass away.

“While most student loans may be discharged due to death as long as the surviving family provides proper documentation, like a death certificate, not all private student loan lenders offer this option. Whether or not the surviving family will be responsible for the remaining balance is up to each individual lender and the details of the loan.

For example, if you were a co-signer on your child’s loan, there’s a chance you could be responsible for paying back that balance if they die. However, when it comes to federal student loans — including parent PLUS loans — if there’s a death in the family and the proper documentation is provided, the loans will be discharged.”

The idea of your college student’s full student loan balance becoming due upon their death could cause financial distress. Therefore, you may want to purchase a life insurance policy for yourself if you’ve cosigned on a private student loan for your child. Or, if you have concerns about your ability to pay down private student loans all at once, you may want to purchase a life insurance policy for your college student. All in all, if private student loans are included in the equation, it could be wise to consider purchasing life for you and your child.

What kind of life insurance is recommended for college students?

Term life insurance may be a good fit for college students because it covers the insured for only a fixed period of time, usually between five and 30 years. Keeping a term policy while you’re still paying off private student loans may be financially wise. After the term policy ends, you’ll no longer receive a death benefit and you won’t have to pay premiums anymore (unless you opt to convert the policy to a permanent life policy). If you’re considering a term policy, you may be wondering: How much does life insurance cost? Premiums vary based on your age and health, but term life insurance is usually much cheaper than permanent life insurance.

If you’re a parent and don’t want to take out a separate life insurance policy for your child, some insurers may allow you to add a child rider to your life insurance policy that could cover your college student. The limits on child riders are usually lower than what you could get on a separate policy, but if your child doesn’t have much debt, it could be a viable option.

Whole life insurance is another option for college students. Whole life policies come with cash value accounts that act as savings or investment vehicles. However, whole life policies are typically much more expensive than term policies, and many states limit whole coverage to applicants 45 years and older.

How do you buy life insurance for your college student?

To purchase a policy on behalf of your college student, you’ll first need their permission. You’ll also need to prove an insurable interest, which means that you would experience a financial loss if your child died. Your cosigned loan documents should be sufficient as proof of insurable interest. Here’s how to go about getting a life insurance policy for your child:

  1. Determine how much coverage you need. You might choose to base this on the amount of debt your child has and the estimated number of years it will take for repayment. A life insurance calculator may help you decide how much coverage you need.
  2. Consider adding a child rider to your policy. If you’re interested in adding a child rider to your own life insurance policy and your current life insurance company doesn’t offer one for college students, you could consider switching your life insurance.
  3. Compare quotes from different insurers. You may want to start by researching the largest life insurance companies, or you may want to try one of the new financial technology startups that offer an online-only process. Getting a handful of quotes can help you find the lowest rate for your child, although premiums shouldn’t vary greatly between similar policy types and features
  4. Fill out the application. You’ll likely need to sit down with your child to do this, as you’ll need specific information about their health.
  5. Schedule a medical exam. This step might not always be necessary; some companies offer no-exam policies. But if you do need to schedule an exam, be sure to ask the agent or insurance company how to proceed. Some companies have specific vendors that they use, and the carrier might even arrange for a nurse to come to your home.
  6. Sign the policy. Once the policy has been approved, you’ll need to sign and make the first payment.
  7. Pay the premium. Most companies have monthly payment plans for life insurance. You might want to consider signing up for automatic payments. You may also be able to  pay the premium quarterly, semi-annually or annually. If you do not pay the premium on time, you risk policy lapse and coverage ending.

Frequently asked questions

Should college students get their own life insurance?

If you want your college student to learn about insurance and financial responsibility, having them purchase their own policy and listing you (or the cosigner of their debts) as the beneficiary could be a great learning experience. However, if your child owns their own life insurance policy, they’ll be responsible for paying the premium to keep the policy active. If you would rather personally ensure that the policy doesn’t lapse so that you have the protection you need as a cosigner, you might want to purchase the policy yourself.

Can a child rider be converted to a whole life policy later on?

Potentially. Many life insurance providers allow you to convert a child rider to a whole life policy for your child upon the age of maturity (when the rider is scheduled to expire). Sometimes, the insurer will limit the face value of that whole life policy based on how much coverage you had for the rider. For example, you might have $10,000 in coverage via a child rider and your insurance company may only allow you to convert to a whole life policy up to five times that value. If that’s not enough coverage for your child once they age, you might want to purchase a separate policy for your child from the get-go.

What kinds of insurance should I purchase for my college student?

Life insurance is an optional purchase, but an important consideration if you share debts with your child. Other types of insurance are also important as well. Car insurance is required in nearly every state. If your child drives, they should either be listed on your policy or have a policy of their own, depending on who owns their vehicle and their residence. The best car insurance companies on the market offer several coverage options for you to choose from.

Renters insurance may also be a key part of your child’s financial wellbeing while at college if they don’t live in school-provided housing. A renters policy provides coverage for your child’s belongings in their apartment or rented home while at college and also provides liability coverage in case someone is injured or your child damages someone else’s property. If you’re considering renters insurance, you may want to look into the best renters insurance companies available.

Written by
Lizzie Nealon
Insurance Writer
Lizzie Nealon is a former insurance writer for Bankrate. Her favorite part of the job is making home, auto and life insurance digestible for readers so they can prepare for the future.
Edited by
Insurance Editor