Student Loan Life Insurance, Is it Necessary?

There is no question that today; an education costs a lot of money. Where does that money come from? Many sources. Students often save money from part time and seasonal work before and during their post secondary education years. As well, they often borrow money from traditional lending sources, banks, credit unions etc, and family. There is always the full intention of repaying that money after graduation.

What happens if the student develops a critical illness during the education years or shortly thereafter and can't work for a while, or in some cases, not at all? Critical illness insurance is a form of life insurance, which will pay a lump sum upon the happening of an incident or a diagnosis of a disease or illness. Does anybody expect that to happen? Of course not, but stuff happens. The critical illness' it covers are heart attack, stroke, kidney failure, cancer diagnosis etc. There are up to 31 incidents or diagnosis that can be covered. People don't think of critical illness as a form of life insurance, but it truly is, because it insures a person's "life" for an occurrence.

It is not an expensive thing either. Coverage of $50,000 can be obtained for as little as $37 a month. When you add that cost to the cost of an education, it really is incidental, relative to the protection involved. Parents can take it out on their children, or children, can, in fact, cover themselves and make their parents or whoever is supporting them, the beneficiaries.

How about life insurance? This is the traditional life insurance that pays a beneficiary in the event of a death. If a student were to die, whether it is from an accident, an illness, or even suicide, how will the outstanding education debt be paid? If the debt is through a traditional source, such as a bank, then the debt is forgiven upon death. If a parent, brother or sister, or a grandparent has helped financially get a student thru school, what happens about that debt? Not only will they suffer the loss of a loved one, but they will also suffer the loss of the money spent on the person's education. It will be difficult all the way around. For only another $12 a month added to the critical illness insurance costs, an additional $50,000 of life insurance can be added. And just think, if you are 19 when it is taken out, it will be all paid up in 20 years and you are covered for life.

There are no age restrictions when these types of life insurance plans can be put into place. Parents can put coverage on their children when they are very young and have it paid up in 20 years. If not done by the parents at an early age, the student can take the initiative themselves and buy their own form of critical illness insurance and life insurance once they are 18. Considering the high costs of education today, it is an element of the education process that is often overlooked.

Writer: John Kovats, CLU
Co Founder,The Benefit Guys
December/09

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