What College Graduates Need to Know About Insurance

With diplomas in hand, millions of college graduates march into the “real world” every year. And with that entry into the real world comes some real-world concerns, including insurance coverage. 

In a 2016 survey commissioned by Experian, a credit-reporting bureau, 71 percent of college grads complained that their schools hadn’t adequately prepared them to manage post-college finances — everything from student loan debt and rent to food and insurance. 

“Once young people are part of the workforce and out on their own, they need to establish a solid financial foundation, including insurance in the mix,” says Loretta Worters, a spokeswoman for the Insurance Information Institute

Here, we’re going to give college grads (and their proud parents) a few lessons about how to deal with insurance matters in the real world. 

Health insurance 

If you’ve nailed down a post-graduation job, there’s a strong likelihood that it’ll come with health insurance coverage. 

“As you sort through job prospects, it’s tempting to go for the opportunity that puts the most dollars in your pocket. But health coverage is perhaps the most important job-related benefit you can get,” Worters says. 

If coverage isn’t available from your new employer, you’ve got some options. 

Under the federal Affordable Care Act, better known as Obamacare, someone usually can remain on or be added to a parent’s insurance plan until age 26, according to the U.S. Department of Health and Human Services

Another avenue: Shop for your own coverage through an individual insurer or a government-established marketplace. For more information about marketplace insurance, visit www.healthcare.gov

You also can look into whether you qualify for federal Medicaid coverage. 

Furthermore, you might consider catastrophic coverage, which will cover medical expenses in a worst-case scenario, such as an accident or serious illness, the federal health department says. Catastrophic coverage costs less than traditional health insurance; in turn, the catastrophic plan provides fewer benefits. Anyone under 30 can buy catastrophic coverage. 

Auto insurance 

Because you’re going to be out on your own, Mom and Dad have decided it’s time for you and your car to be removed from their auto insurance policy. What now?

RELATED: 5 Factors That Determine Your Car Insurance Rate

Bob Hunter, director of insurance at the Consumer Federation of America, advises college graduates to shop around extensively for auto insurance to find the best price. 

In hunting for auto insurance, Worters says you should keep in mind the factors that’ll affect how much you’ll pay, such as:

  • Previous claims.
  • Driving record, including recent traffic tickets.
  • The kind of car you drive, as well as how many miles you drive and where you drive.

“A car that is popular with thieves or has expensive repair costs will cost more to insure,” she warns.

Worters says you can reduce your insurance premium by raising the deductible, installing anti-theft devices, or dropping collision coverage if you drive an older car.

Renters insurance

Chances are, you’ll be renting a post-graduate home rather than buying one. Therefore, for the purposes of this article, we’ll focus on renters insurance.

Renters insurance protects the things you own, Worters says.

“People who rent their home often make the mistake of thinking that the landlord’s insurance covers their possessions in case of a fire or other catastrophe,” she says. “Not true — you need your own insurance.”

Renters insurance also provides liability coverage — protection from lawsuits arising from harm that you, your relatives or your pets cause to people or property.

CHECK OUT: Renters Insurance 101: What's Covered?

Fortunately, renters insurance is pretty cheap: roughly $12 to $30 a month.

As long as you make payments on time and don’t file a bunch of claims, renters insurance can help you establish a good record when it comes to property insurance. “If you show that you are a responsible insurance risk, you’ll have no trouble getting insurance when you eventually buy your own place,” Worters says.

Life insurance

At this point in your life, you don’t need to buy life insurance unless you’re married or have someone else, like a child or an aging parent, who depends on your income, experts say.

However, you might consider purchasing life insurance now if you’re single — as long as you’re healthy and your family has a good health history — because “your insurability is at its peak and you’ll be rewarded with the best rates on life insurance,” says Life Happens, a nonprofit that educates consumers about life insurance.

Disability insurance

No one wants to think about the possibility of tragedy striking. “When we are young, we feel indestructible,” Worters says.

However, someone who’s the age of a typical college graduate is four times more likely to be disabled than to die, she says.

“Many employers offer an option of disability coverage, which provides for lost income if you are injured as a result of non-work activities and are unable to work,” Worters says.

If the injury is related to work, then workers’ compensation insurance — paid for by your employer — will kick in.