3 Reasons New Grads Would Need Life Insurance: Do They Apply to You?

“Should I get life insurance?” is a common question many of us ask when enrolling in work benefits, especially if it’s the first time.

The answer is that it depends, but for many new graduates entering the workforce, life insurance is important to consider. If you are a new grad and your employer offers subsidized life insurance, definitely take advantage of it. It’s free (or almost free) coverage that can provide financial support for those who have been investing in your future, should something unexpected happen to you.

However, life insurance coverage through work is often only a few times your annual salary and may not be enough to cover your needs. 

Here are a few scenarios where getting a basic term life policy of your own makes sense:

1. You Want to Avoid Saddling Your Parents with Student Debt

If you have a private student loan and your parents were co-signers on that loan, they may get stuck paying off your debt if you unexpectedly pass away. No one likes to think about that happening – and hopefully you have a long, full life ahead of you – but term life insurance can help make sure parents won’t be burdened by unexpected debt if something happens to their adult children. Many federal student loans are forgiven if the graduate passes away, but private loans don’t follow the same protocol. So check on any student loan debt obligations that might fall to your parents, and consider getting some term life insurance so they can pay off that debt if you’re no longer around to do so.

You can get a small life insurance policy through Ladder to cover what you need now, and the best part is that you can increase or decrease your coverage as your financial needs change. Paid down your loans in half the time you expected? Drop your coverage by half with just a few taps in the app and watch your premium go down by the same amount.

2. You are Responsible for the Financial Security of Others

Coming out of college and grad school, many graduates have a lot of credit card debt, in addition to student debt. If you have a spouse or children to provide for, aging parents to care for, or a mortgage you are paying down, it’s important to make sure your dependents can be financially self-sufficient if something happens to you. Being able to maintain a consistent standard of living and being with the community can make a huge difference when your family is recovering from a tragic event. Look at the life insurance coverage you get from work and see if you need additional coverage to make sure your loved ones would have enough financial support. 

An additional benefit of independent/additional life coverage? As long as you are within the term of the policy, it can stay with you no matter where you go, providing a financial safety net. If you leave a job, get laid off, or take time between jobs to travel, the life insurance you had through work will no longer be in effect. But if you have additional life insurance that you own independently, you can rest easy during these lulls knowing there's a financial safety net for your people.

3. You Realize Getting Life Insurance Early is a Smart Financial Move

The beauty of term life insurance is the price stays fixed once you get a policy. So if you get a policy when you are young and super healthy, your rates will be lower than if you wait until you are in the throes of “adulting” (spouse, kids, house, mortgage). Furthermore, if you develop a chronic illness or disability in later years and have not gotten life insurance before that happens, your premiums may be much more expensive. You may even be uninsurable when you try to get life insurance, which is not ideal when you have a family who depends on you financially. 

If you get a policy while in your twenties, your monthly premiums can be much more affordable and budget-friendly because you are likely young and healthy. And you’ll still be paying the same low price 20-30 years from now, depending on the term you choose. For many people, they find their monthly insurance premiums are equivalent to the cost of buying a few cups of specialty coffee a month. So imagine the cost savings you can rack up over time, if you lock in a low rate when you are younger, versus paying a pretty penny if you wait until you are older.

At the end of the day, deciding whether or not you need a basic term life insurance policy comes down to how much debt you need to cover, how much financial support you want your loved ones to have if something happens to you, and the financial legacy you want to create.

*About the Author

Liana Corwin is the Director of Communications and Editor of the Financial Literacy Blog at Ladder, an award-winning insurtech that’s using technology to make life insurance smart, easy, and affordable. Passionate about helping consumers, Liana has spent nearly a decade working with brands that solve hard problems and make consumer experiences delightful.