What Type of Life Insurance is Best for New Grads?


As a new college graduate preparing to enter the workforce, you face a slew of adult choices, one of which is whether or not to acquire life insurance. You might think it’s too soon to get life insurance. However, you may be surprised to learn that there are several reasons why now is the best moment to consider it.

Buying life insurance isn’t a one-size-fits-all solution. It is entirely dependent on your requirements, health, and lifestyle. Choose the best life insurance type for you and your situation. Here are a few of the considerations to make when deciding what’s suitable for you. 

Why Get Life Insurance as a New Grad?

Several situations warrant looking into life insurance policies as a new graduate. Although you’re likely young and physically fit, you may be taking on financial risks as you head out into the real world. Life insurance can help protect your loved ones from unexpected costs and debt collection if you pass away. 


You have student loan debt

College grads can face hefty student loans at the end of college. On average, people in the United States have around $38,000 in student loan debt. The student loan debt will be larger for private or out-of-state colleges or post-graduate medical or law schools.

If you die with federal student loan debt, your lender will forgive your loan through a student loan discharge due to death.

If you have a private student loan, including a refinanced loan, the lender might come after your estate when you die. This depends on your state’s probate process. But if you die, life insurance protects your loved ones from having to pay your private student loan debt.


You’re buying a home

After graduation, you may buy a house. The purchase of a home is an important financial decision. If something unexpected happens to you and you can’t make your mortgage payments, your insurance can help. Purchasing life insurance and buying a home gives your loved ones financial protection.  

If you want someone to benefit from your life insurance policy for years after your death, choose a policy that lasts as long as or longer than the term length of your loan. As a result, your beneficiary will have enough money to keep the home. They can use the funds however they want, keeping the house, selling it, or renting it out.


You’re getting married

It is a good idea to have life insurance when you get married. If something happens to one of you, your spouse may be responsible for paying funeral expenses. Married couples often share finances and debts. They also take on new costs together, like a mortgage. As you plan for your future together, think about any problems that could happen that would affect both of you. Life insurance protects your spouse’s finances if you die. 


When You May Not Need Life Insurance

There are a few situations where new graduates may not need life insurance. For example, if you do not have large student debts or are single with no dependents, buying life insurance isn’t as urgent. 

However, even if you don’t require it immediately, having life insurance on your radar is a good idea as soon as you start taking on large sums of debt. It’s also smart to get a life insurance policy while you’re young before you have medical conditions that can raise premiums or disqualify you from coverage. 


Types Life Insurance

The two most common types of life insurance that life insurance companies offer are term life and whole life. There are several important distinctions between them.


Whole life

Whole life insurance is insurance that covers you for your entire life. It is more expensive than other insurance types, but it has one advantage: the cash value. The cash value of the insurance services is money you can borrow in the future to pay for the premium years.

You can’t outlive your whole life policy, but you may cash it in and receive a lump-sum payout. As long as you make your payments and follow the policy agreement, you will have whole life insurance for the rest of your life. 

Some whole life policies require premiums throughout your lifetime, while others only ask you to pay premiums for a few years.


Term life

The most affordable type of life insurance is called term life insurance. If you die while you have term life insurance, your family will get money to cover the cost of funeral expenses and unpaid bills. Term life insurance can last for 5, 10, or 20-year durations. It can also stop when you reach a certain age.

While you’re investing your money and earning interest, you will not get to spend any of the money yourself if you outlive the term coverage. Another thing to think about is that the cost of a term policy rises with age, making it a more expensive long-term option than whole life insurance.


Best Life Insurance for Single New Grads

Funeral expenses aren’t the only thing to consider. If you are a recent graduate and single, a term life insurance policy is likely your best option, so you can tailor the policy to fit your budget. Although the beneficiary does not currently rely on you for financial assistance, they may require the money in the tragic event of your death. 

For example, if your parents co-signed your 10-year private student loan, they will be responsible for the loan if you die. Taking out a 10 or 15-year term policy may be preferable, so your parents don’t have to worry about it. This way, they can mourn your death without worrying about money.

There are several factors to consider when deciding if term life insurance is an appropriate insurance option for you. One factor to consider is who benefits from your life insurance policy if something happens to you. You might choose to name your partner or a close relative as the beneficiary; it should be someone you trust.


Best Life Insurance for Married New Grads

If you’re married and want to provide for your family while also saving for your future, a whole life insurance policy is an excellent alternative to term life insurance. Your policy will build equity over time, which will give you a death benefit and cash value. But whole life insurance is more expensive than term life insurance.

Whole life insurance is different from other types of life insurance because it does not expire. It also provides a death benefit, money given to your family after you die. If you have a young family, whole life insurance can protect them after you’re gone.


Get a Life Insurance Quote Today

As a new grad, you should consider getting life insurance. It will give you peace of mind knowing that you’re taking care of your loved ones financially if something happens to you. Whole life insurance provides coverage for your entire life, while term life insurance is only for a specific period. The right choice for you depends on your circumstances. 

Finance is us can help you find the best life insurance coverage for you. Whether you need home, life, or renters insurance, we can help you decide which affordable policy fits your needs.


Disclaimer: All content on this site is information of a general nature and does not address the circumstances of any particular entity or individual, nor is the information a substitute for professional financial advice and services.

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