Life insurance for University students 

Like most parents, you are proud and excited for your child as you help her prepare for her first big adventure — college or university. Of course, like most parents, you’re sad too because for 18 long and sometimes chaotic but mostly happy years, you’ve been looking after her, and now the kid is flying the coop.

And being a conscious parent, you can’t help but ask yourself: Does a university student need life insurance?

The answer is it depends.

University students with a co-signed private loan can benefit from having life insurance. The same is true for students who are married. Life insurance is also a good option for those students who plan to have dependents in the future. Here’s what you need to know about life insurance for post-secondary students and how it can safeguard their financial future.

Why University Students Should Consider Life Insurance

As a college student, life insurance might not seem important. However, understanding the life insurance benefits can highlight its significance for students. It can cover your student debt, protect your future insurability, and provide financial help to your spouse if you are married.

• Life insurance can help your cosigner pay off the student loan debt

There are different types of student loans, and not all of them are automatically canceled in the event of the borrower’s death. Federally and provincially government-backed student loans are discharged when the borrower dies, but private student loans don’t work that way.

The co-signer may be on the hook for the outstanding balance if you have a cosigned private loan. Having a life insurance policy ensures your debt won’t become a loved one’s burden.

• Life insurance can help spouses or dependents

The typical image of a college student is that of a recent high school graduate teenager subsisting on instant noodles. However, that’s not the case with everyone. Some students are married or get married during their college years. Others are older, married, and had put off going to college for financial or personal reasons. Still others have children.

Life insurance is almost a must-have for college students with dependents. If something happens to them, the insurance payout could help their family stay afloat.

• Purchase life insurance early in life means lower premiums

Life insurance is cheaper and easier to buy at a young age. Purchasing a term life plan when you’re young and healthy allows you to lock in low rates for the entire policy term. If you plan to get married soon after graduating, you may benefit from taking out an affordable policy that will stay in effect for the next 30 or 35 years. Your insurance cost will remain low, and your future spouse and children will have the financial protection they need.

Types of Term Life Insurance Policies for University Students

There are two types of life insurance: term life and permanent life insurance. University students are eligible for both, though term life is sufficient for most young adults. 

Term Life Insurance

Its insurance policies run for a specific period, like 10 or 20 years. This period is called the “term” of a policy. Your beneficiary receives a tax-free lump sum if your death occurs during the policy term. If you outlive the policy term, no benefit is paid, and your policy automatically expires unless you renew it. Most term life plans let policyholders renew coverage without new underwriting. This option can be useful if you need life insurance protection for longer than expected. 

Most students who take out life insurance do so to cover their private student loans. If you’re one of them, it is a great choice. This is because: 

• You can match the policy length to your student loan (e.g., a 10-year policy can nicely meet your requirements if your loan has a 10-year repayment period)
• You can renew the policy without taking a new medical exam if you decide to continue coverage beyond the original term 

But what if you are sure you won’t need life insurance coverage after you’ve paid the debt? In that case, decreasing term life insurance might be the best option since it is more affordable. Like a standard term life policy, decreasing term life insurance covers a set period, but the death benefit reduces over time. 

Permanent Life Insurance

As the name suggests, permanent life insurance offers lifelong coverage. Many of these policies also build cash value, which grows tax-deferred over time. Whole life and universal life are two of the most popular types of life insurance. 

Both of them combine lifetime coverage with the cash value feature. Stable cash value growth and a death benefit that doesn’t change are the main attractions of whole life insurance. On the other hand, Universal Life’s USP is that it lets you adjust the premium within limits as your circumstances change. 

Both whole life and universal life insurance are significantly costlier than comparable term life plans. Keeping up with the premium payments may prove difficult if you are on a tight budget.   

Determining Your Life Insurance Needs as a Student

When purchasing life insurance to cover a student loan, it’s important to ensure the death benefit at least equals the loan balance plus interest. Also, your policy’s term should be at least as long as the loan repayment period.

The availability of life insurance for international students can vary depending on the insurer and location. It is crucial to consult with insurance professionals to find tailored policies that meet the unique needs for international students.

If you are married, you’ll likely need more coverage than other students. Even if you aren’t earning, you could split expenses as a couple, especially if you have taken loans to pay rent and other monthly bills.

If you pass away and can no longer assist your spouse with the bills, they must bear that extra financial burden. Alternately, if you do household chores — like child care, tutoring children, cooking, cleaning the house, etc. — your spouse would probably either have to take care of the house themselves and possibly reduce their working hours or hire someone.

Comprehensive life insurance coverage can ensure your spouse and children won’t face financial hardship after you’re gone. The life insurance payout can help your partner pay for:

• Mortgage or rent
• Everyday living expenses
• Monthly bills
• Child care
• Your funeral and end-of-life medical expenses

Factors to Consider When Buying a Life Insurance Policy

When buying an insurance policy, there are several factors to consider to ensure you make an informed decision. Here are some key considerations:

• Age and Health: Age and health can significantly impact your insurance premiums. Generally, the younger and healthier you are, the lower your premiums will be. This is why it’s often beneficial to purchase life insurance early in life.
• Financial Obligations: Consider your financial obligations, such as student loans, credit card debt, and living expenses. You’ll want to ensure that your insurance policy can cover these expenses in the event of your passing, which can help provide financial security to your loved ones in case of your death. This is especially important for college students who may have significant financial obligations.
• Dependents: If you have dependents, such as a spouse or children, you’ll want to consider their financial needs in the event of your passing. You may want to consider a policy with a higher death benefit to ensure their financial protection.
• Policy Type: There are two main types of life insurance policies: term life insurance and permanent life insurance. Term life insurance covers a specified period, while permanent life insurance covers your entire life. Understanding the differences between these types can help you choose the right policy for your needs.
• Premiums: Consider the cost of premiums and how they will fit into your budget. You’ll want to ensure you can afford the premiums for the policy's life. Remember, term life insurance policies are generally more affordable than permanent ones.
• Insurance Provider: Research and compare different insurance companies to find one that meets your needs and budget. Consider factors such as customer service, claims process, and financial stability. Choosing a reputable insurance provider can give you peace of mind that your policy will be honored when needed.

Benefits of Having a Life Insurance Policy as a Student

As a student, you may not think you need life insurance, but having a policy can provide several benefits. Here are some of the advantages of having an insurance policy as a student:

• Financial Protection: A life insurance policy can provide financial protection for your loved ones in the event of your passing. This can help ensure that they are not burdened with debts and expenses, such as student loans or credit card debt.
• Financial Security: It saves the students from some highly expensive medical care that could be quite burdensome.
• Peace of Mind: Having a life insurance policy can provide peace of mind, knowing that you have taken steps to protect your loved ones financially. This can be especially comforting if you have dependents who rely on your financial support.
• Flexibility: Many life insurance policies offer flexible payment options and adjustable coverage amounts, making managing your premiums and coverage easier as your financial situation changes. This flexibility can be particularly beneficial for students whose financial circumstances may fluctuate.
• Cash Value Component: Some life insurance policies, such as permanent life insurance, offer a cash value component that can grow over time. This can provide a source of funds for future expenses, such as tuition or a down payment on a home. The cash value component can be a valuable financial asset.
• Locking in Rates: Buying a life insurance policy as a student can help you lock in lower premiums, saving you money in the long run. Insurance companies typically offer their best rates to young and healthy individuals, so purchasing a policy early can be a smart financial move.

How much does life insurance cost for college students?

Life insurance companies calculate your premium rate based on policy type, coverage amount, and relative risk as determined by their underwriters. The insurer considers factors such as your age, health, medical history, and smoking habits to determine the level of risk you pose to them. 

Your premium costs will go up if you smoke, are severely overweight, or have underlying health issues. Opting for permanent life insurance or a higher coverage amount means higher monthly premiums. 

Generally speaking, life insurance for post-secondary students isn’t expensive. For instance, a 20-year-old healthy, non-smoking female can get a 10-year term life plan with a death benefit of $100,000 for just $13 a month. 

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How to Get Post-Secondary Life Insurance

Buying life insurance is not complicated. However, understanding the steps involved in getting post-secondary life insurance makes it easier to get the right coverage for your unique situation.

• Determine your coverage needs

The amount of life insurance you need depends on your financial obligations and personal circumstances. 

Are you buying life insurance to cover your private student loan? Make sure your policy is large enough to pay the outstanding balance. 

Are you married or planning to tie the knot after completing graduation? You will probably need more coverage than the average student and may want to consider the guaranteed insurability rider. The rider enables you to add more coverage at specific dates or when a major life event— such as marriage or birth of a child — occurs without underwriting. This ensures you’ll have adequate coverage at every stage of life. 

• Determine the type of policy you need

Term life insurance is college students' most popular policy type—and understandably so. It is affordable, easy to understand, and doesn’t include bells and whistles that young adults generally don’t need, like cash value. Other main coverage options include whole life and universal life insurance. 

Understanding how each type of life insurance works can help you pick the right one. 

Compare quotes

Get free quotes from multiple providers to find out who’s offering you the best deal. Look for a life insurance plan that balances affordable premiums with coverage that provides adequate financial support for your family after your death. 

Fill out the life insurance application 

Apply for the desired coverage once you’ve zeroed in on an insurance carrier. The application form will include questions about your health, lifestyle, income, medical history, etc. Answer all the questions truthfully. 

Take a medical exam

Most traditional life insurance plans require applicants to take a medical exam, similar to the annual physical. You can take the exam at a convenient in-center location or at your home. The insurer pays for it, and the entire exam takes 30 to 45 minutes. 

Wait for approval and pay the first premium

You may have to wait between a few days to a few weeks to determine the insurer’s decision. If it agrees to write you a policy and you are happy with the terms and conditions of the insurance contract, sign the policy papers and pay the first premium to activate coverage. 

How Can I Lower My Life Insurance Rates?

Premiums for post-secondary life insurance are relatively cheap. But if you want the best deal, the following tips will prove handy: 

• Shop around: Each insurance carrier assesses your risk differently, so premiums vary from one provider to another. Shopping around and working with an independent broker like Dundas Life who can get you personalized quotes from multiple providers can help you secure the best price. 
• Pay premiums annually: Most insurers offer at least a 5% discount when you pay premiums annually instead of monthly.
• Look for discounts: Don’t forget to ask about other discounts, including policy bundling, that could reduce your annual insurance bill. 

Conclusion

Life insurance for post-secondary students could be necessary if they have student loan debt or dependents or if there’s a plan to have dependents in the future. At Dundas Life, you can compare top-rated life insurance companies in one spot and get the coverage you need at a great price. Schedule a call with one of our advisors today.

Frequently Asked Questions (FAQs)

Do post-secondary students really need life insurance?

Every college student’s circumstances differ, so there’s no one-size-fits-all answer. You may need life insurance if:

• You have a cosigned private loan, and after your death, the co-signer will be responsible for the debt
• You have dependents (like a spouse or children)
• You plan to get married and start a family soon after graduating and would like to lock in low premium rates

How can I find affordable life insurance as a college student?

Life insurance is typically very affordable for college students. For example, a $500,000 term life policy for a healthy 20-year-old female nonsmoker costs around $13 a month. Working with an independent insurance broker, who can get personalized quotes from multiple companies, can help reduce your insurance costs. 

What types of life insurance policies are available for students?

College students have access to the same life insurance options as people in their 30s and 40s. However, term life is often the best option since they have fewer financial obligations and little to no income. It’s affordable, easier to understand, and provides coverage for a set period. 

Is it possible to adjust my life insurance coverage as my needs change?

Depending on the terms and conditions of your insurance contract, you may be able to increase the coverage amount up to a certain limit or renew coverage (in the case of a term life policy) without underwriting if your circumstances change. Read the policy document or directly speak to the insurer to determine what changes are allowed and what are not. 

What are the main benefits of getting life insurance early in life?

Buying life insurance early in life allows you to lock in low premiums for the rest of your life or the duration of the policy term. This is because insurance carriers reserve their best rates for young and healthy. You also get to lock in your future insurability — which is no small benefit. 

What if your health declines as you age? A chronic health condition may limit your life insurance choices or make coverage exorbitantly expensive. Taking out a policy in your early 20s ensures you’ll have adequate coverage when your responsibilities grow — which they probably will — regardless of any changes in your health. 

What happens if I can't afford my life insurance premiums in school?

Life insurance premiums for applicants in their early 20s are very affordable. With little planning, you shouldn’t have trouble keeping up with the premium payments. However, if you miss a premium payment and the grace period, your policy will lapse.