Does your college student need life insurance?

Information courtesy of USAA Life Insurance Company and USAA Life Insurance Company of New York.

Heading off to college is a big moment for your child — and for you as a parent. In addition to feeling proud and excited, you're likely also experiencing a little anxiety and sadness that your kid is growing up and becoming an adult.

Part of this foray into adulthood is learning the building blocks to a secure financial future. As a parent, you can help set your child up for success by teaching them basics like how to spend, save and use credit wisely. Life insurance for college students can also be a useful financial planning tool.

Why consider life insurance at a young age?

Many people avoid talking about life insurance — especially life insurance for kids — because it's uncomfortable to think about death. But for your young adult, it's not so much about providing a death benefit as it is about protecting their future insurability.

In the insurance world, age and health are the some of the main factors that can affect the cost of your policy. This means it may be easier and more affordable to qualify for an insurance policy when you're young and healthy. Most students won't have a problem passing a medical exam, and the policy is usually issued quickly unless there's a major health concern.

If your college student gets coverage as a young adult, they can lock in life insurance protection for a long time — possibly even for life. And that can have other benefits. For example, a life events rider gives them the option to add more coverage in the future without having to go through underwriting.

How can life insurance benefit college students?

In addition to protecting your child's future insurability, purchasing life insurance gives you an opportunity to talk to your kids about financial planning.

College can be a great time for this conversation because young adults are already planning for the future. Every day, they're learning the skills they need to build a career and navigate adult life.

Once students graduate from college and transition into adulthood, it can be more complicated for them to buy life insurance. So it's helpful to lock in their future insurability while they're still in college.

Here are a few reasons it gets harder for young adults to buy life insurance the longer they wait:

• As people get older, their health often changes. These changes can make it harder to qualify for affordable life insurance. Your child could also start unhealthy habits which could affect their rates or insurability.
• They may choose a career in a field that insurers consider to be high-risk, such as aircraft pilot, flight engineer, roofer or steel worker. That could affect their insurance rates.
• Your child might pick up high-risk hobbies like rock climbing, skydiving or motorcycle riding, which could affect their rates or ability to qualify.

Life insurance can help with student loan debt.

The average student who graduates with a bachelor's degree from a public university in America, does so with more than $25,000 in student loan debt as of July, 2023.

If they were to die before paying off those loans, the outstanding balance on federal student loans would be canceled. Private student loans, however, wouldn't be so straightforward. That could affect you as a parent. If you cosign for the loan, you could be responsible for the debt.

A life insurance policy's death benefit can be used to pay off student loan debt. But be sure to review your contract to ensure your coverage amount is sufficient.

Life insurance can help spouses or dependents.

The stereotypical college student is a fresh-out-of-high-school teenager living off instant noodles. But that's not the case for everyone. Some students are married or get married while in college. Others are older, married students returning to college after taking time off. Still others have children.

For these students, it's easy to see why life insurance is a good idea. If something should happen to the policyholder, death benefits can help provide financial stability and security for their families.

Life insurance can give students a jumpstart on financial success.

College is many students' first taste of independence — including financial independence. They're learning to manage month-to-month expenses, establish credit and build their savings.

Life insurance is one more brick in a solid financial foundation. In addition, since they're moving out on their own, it's also a great time for them to consider renters insurance.

What are the best life insurance options for young people?

There's not necessarily a wrong type of life insurance for young adults, but the following options may offer more benefits for the future.

• Starter policies. These basic, no-frills policies usually come with limited underwriting requirements. They're meant to be affordable, can follow a student after graduation from job to job, and are easy to sign up for.
• Traditional policies with life events riders. Many life insurance companies offer term insurance and permanent insurance policies with a life events option rider. The benefit? Once your college student is approved for coverage, they'll have the option to increase that coverage after certain birthdays and life events like getting married, buying a home or having a baby.

How much life insurance does a college student need?

Your children's life insurance needs will depend on their specific situation. How much student loan debt will they have? Are they married? What do they plan to pursue as a career, and how can insurance help protect that future income?

USAA uses the L.I.F.E. method to calculate the amount of coverage you might need. Ask yourself these questions.

• Liabilities. What amount of money do I need to ensure any debts my child has could be paid off? Consider potential future debts if your child is currently debt free.
• Income at risk. How much of my child's current and future income should be replaced? Start by researching starting salaries for the career they're pursuing.
• Final expenses. How much would I need for funeral costs, final medical expenses, or other immediate costs?
• Education goals. How much will my child need for future education expenses? How much will it take to pay off their student loan debt?

If you have questions or concerns, one of USAA's insurance professionals can help walk you through your options and help you find the right policy for your child.