Insurance Premiums

Most college graduates will not consider insurance as they get their first job.  However, this is something that you should consider and here's why.

• Life Insurance: Life insurance increases with age.  So if you want to get life insurance when you are young, it will be pretty inexpensive.  As a college graduate who may not have any kids, what would the argument be for purchasing life insurance?  First, it is cheap and will only get more expensive.  Second, if you take out student loans, and something happens to you, the co-signer is responsible for paying those off.  If your parents co-signed for you, those will become their responsibility.  Third, unfortunately, sometimes things happen to people's health that are unforeseen and which will cause the price of life insurance to skyrocket.  Keep this in mind if you plan on having children in the future.  
• Term Life Insurance: Term life insurance is less expensive than whole life and can secure higher amounts of insurance but do not hold any value.  Meaning, you do not earn any money on your insurance payments.*
• Whole Life Insurance: Costs more than term insurance and will insure you for a lot less than term.  However, whole life insurance is an investment vehicle so at some point, while you are still living, you can cash in on the dollar amount.*  

 *It is recommended that you consult an insurance agent, do your research, and talk to friends and family when deciding which type of insurance is best for you.  If you are looking for term insurance to cover $50,000 and are in good health, never smoked, have a clear driving record, and do not engage in risky behavior like car racing or skydiving, your coverage would likely be about $50/month.

• Home Owners Insurance: Home owner's insurance OR Renter's Insurance covers the cost, minus a deductible, for any damage or loss to property in the home you own or the apartment you rent.  If you own a home, you are required to have home owner's insurance. Renter's insurance is a must have, but you are not required by law to have it.  Good news about renter's insurance is that it is very inexpensive!
• Deductible: A deductible is the amount you pay before insurance kicks in.  So if you had property damage of $1,000 and you have a deductible of $500, insurance will pay you $500 after you pay the first $500.  Talk to an insurance agent to decide the level of deductible.  Renter's insurance usually costs approximately $20 per month.  So make sure you get renter's insurance!  It's well worth it!**

**The higher the deductible, the lower the cost of the insurance.

• Health Insurance: Health insurance is required by the Affordable Care Act (Obamacare).  If you are fortunate, you will be covered by your employer.  However, most employers still require the employee to pay for a portion of their health insurance cost.  If you have insurance by your employer, you should factor it into your monthly "take home" income.  If you are under the age of 26, you can still be under your parent's insurance plan.  If you have to calculate your insurance as a single healthy person, the best way to estimate is do some research.  For example, a single 26-year-old earning $16,000 might pay $537 toward the annual premium for a mid-level "silver" plan (about $45 per month), according to estimates from the Kaiser Family Foundation (www.healthreform.kff.org/subsidycalculator). The rest of the premium would be covered by a $2,853 tax credit. (Deductibles and co-pays could cost up to an additional $2,083, depending on how much care the person needs.)  More likely a scenario, a 26-year-old earning $35,000 (average salary of a college graduate, would pay $3,325 in premiums — $277 per month — for the same plan, after only a $66 tax credit. (And you might be on the hook for another $4,167 in out-of-pocket costs.).  So if you are paying out-of-pocket, estimate $277 monthly cost for health insurance if you are working and do not get it through your employer.
• Disability Insurance: You should absolutely invest in supplemental disability insurance.  Generally the cost is about $40 to $80 per month.  It is well worth the protection!

For more information on planning a budget, click Financial Management!