Insurance for grads: How to stay covered in the real world

Jill Overmyer

Graduation is a new beginning -- and the beginning of new responsibilities. If you've recent wrapped up high school or college, your old insurance coverage may no longer fit. Here's how to make sure you're covered for whatever the future throws at you.

Auto insurance

If you are on your parents' auto insurance policy, be sure it will follow you wherever you go. You still should be protected under your parents' policy if you're driving a car they own, according to the Wisconsin Office of the Commissioner of Insurance. But if you buy your own car, you'll need your own coverage.

Your insurance costs will be determined by your driving record and the kind of car you have. If you're moving to another state, make sure you know the auto insurance laws where you'll be living. Each state has its own minimum liability insurance requirements. And some states have "no-fault" auto insurance laws, meaning you may have to buy different kinds of coverage.

Health insurance

Health care reform has made it easier for many young adults to stay on their parents' health insurance policies. Plans that offer dependent coverage must allow adult children to remain on a parent's plan until age 26. This rule applies even if you don't live at home.

If your parents don't have health insurance and you don't have coverage through a job, you'll have to find a policy in the individual market. The high premiums may lead to sticker shock. Yet you may be able to find more affordable coverage if you get a high-deductible or short-term policy.

High-deductible health insurance (also known as "catastrophic" health insurance) offers limited coverage for a lower monthly premium. This kind of insurance covers major medical costs, according to the National Association of Insurance Commissioners (NAIC), but not routine checkups. In addition, you'll have to pay down a deductible before coverage kicks in. The higher the deductible you select, the lower your premium will be.

Short-term health insurance may be an option if you expect you'll soon have a job with health benefits. This type of policy provides coverage for only a short period of time -- often three, six or 12 months, according to the NAIC. Keep in mind that short-term plans impose many limitations in exchange for low premiums. Many plans have coverage caps.

Renter's insurance

Once you leave the nest, any belongings you take with you won't be covered under your parents' home insurance. So before you move into your new apartment, be sure you have renter's insurance.

Many new renters mistakenly believe that their belongings are covered under their a landlord's property insurance. But the landlord's policy protects only the building -- not the clothes, electronics and furniture you put inside it. Renter's insurance protects your belongings from disasters specifically stated in your contract, like fires, lightning or theft, up to the limits of your policy. Earthquakes and floods, however, often are excluded.

Depending on the value of your belongings, renter's insurance can be quite affordable. State Farm, for example, offers coverage for as little as $10 a month. Take inventory of all your valuables to make sure that you have enough renter's insurance to replace all of your possessions.

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