Insurance and Finance

Insurance Needs for Grads

By Jennifer Chappell Smith 4.1.18

The baby books. The class pictures. The framed diplomas. These photos and documents mark milestones that pass as quickly as stones skipped across a Texas lake. Before you know it, your college grad will be wading through paperwork that signifies a new kind of moment: financial independence.

As these fledglings move out of the nest once and for all, they’ll need to consider the kinds of insurance they’ll need to have to protect their vulnerable position. This guide to understanding the fears of grads can help.

Lessons Learned

Much of what college grads will learn about insurance and personal finance will come from experience as they enter adulthood. But sharing information about why insurance is important can help them make smart choices when it comes to choosing to spend their money on the sometimes-invisible benefits of insurance.

Quick note: You might need to explain some terms. Not every college grad knows what a premium is. Make sure your grad knows it is simply the amount of money you hand over to the insurance company for covering your property with the policy you purchased. Many policyholders pay monthly or once every six months.

Auto Insurance

I still recall my mother’s voice on the phone telling me what I knew had been coming for quite some time: I was being taken off the family auto policy. I’m sure she framed it as a positive since my internship after graduation had turned into a full-time job. “Now you can afford your insurance — all by yourself!” she said. She may have used the same tone she used when I was a baby to exclaim, “She took her first step! Get the camera!” Now she left me to figure out how to work the cost of the premium on my meager, first-job-out-of-college salary. 

Benefit: The premium was something I was glad to pay, knowing I was protected against damage from an accident or from liability or damages if I was involved in a collision. Made sense to me!

Renters Insurance

When I first started paying for that auto policy, I had already sprung for renters insurance when I moved in with two friends — just in case something unpredictable happened like a fire or theft. After all, the bookcase in the den was mine with a few prized first editions, and the bed in my room was an antique four-poster handed down from my grandmother. I had few possessions, but they meant a lot to me. 

Benefit: I learned renters insurance would cover the cost to at least replace those things, even if it couldn’t repay the sentimental value. It’s also usually relatively inexpensive.

Health Insurance

Options abound in the current healthcare climate, but make sure it’s something you talk through with your adult child. I was lucky enough to have coverage through my employer in my 20s, but many recent grads work freelance gigs these days or opt for federally subsidized options when they’re starting out. Many stay on their parents’ policies for as long as the law allows (currently, that’s age 26). 

Benefit: Many in their 20s don’t have the financial means to bounce back from a car accident, hospital stay, or serious medical condition or chronic illness without parental help. Avoid feeling as if you’re walking a tightrope above financial ruin by having health insurance in your back pocket.

Life Insurance

When my cousin and I first graduated, he was getting into the insurance business. He invited me to lunch and got me thinking: If I died, would I have enough money in the bank to pay off my credit card debt? My apartment rent for the last month? Not to mention the cost of my funeral. Would my parents have to foot all of those bills?

Benefit: Life insurance is really a gift you give your loved ones. 

In my 30s, marriage and houses made insurance a vital part of my financial discussions with my husband. Now in our 40s, we have other reasons to discuss insurance and keep it up-to-date — namely our three sons. But it’s hard to think that far ahead when your children are just starting out. Giving them a little perspective and making sure they understand the vital role insurance plays in the total picture of their financial security can help them make wise decisions just out of college and for the rest of their lives.

Before your kid starts donning school colors and practicing fight songs, find out the answers to these 10 questions.

Coverage and discounts are subject to qualification and policy terms and may vary by situation. Life insurance products are offered through Southern Farm Bureau Life Insurance Company. © 2018 Texas Farm Bureau Insurance