Decisions for Graduates – Car and Housing Insurance
This spring many new college graduates will take their place in the work force. They will face the first of many lifetime financial decisions. Since many graduates have been covered under their parent’s policies, they will now need to buy these coverage’s themselves. Here are a couple of tips:
- When to come off your parent’s policy. From your parent’s perspective, they will probably want you off their policy as soon as possible, and there is no reason to delay it.
- What company to insure with. Your first inclination will be to go with the same company that your parents have, but this is a good time to get prices from other companies and make sure you have proper protection at a competitive cost. When searching, avoid insurance companies that don’t have an agent or an agent that only represents one company. You want someone who represents your interests first, not the interests of the insurance company.
- What coverage to carry. You must carry liability insurance according to the laws in every state. This pays for damage or injury you might cause while driving. The law will tell you the minimum amount you must have. However, the state minimum is inadequate. In Indiana, for example, you are only required to carry $25,000 to pay for damage you may cause. What happens if you cause an accident and cause a total loss to a car worth more than $25,000 (and there are a lot of them, not to mention trucks and buses)? Thankfully, it costs little to increase coverage above the state minimum. Ask your agent to figure your quote with several different higher limits and decide what makes the most sense for you. You then need to decide whether or not to carry “full coverage” which pays for damage to your own vehicle. If your car isn’t paid for, the financing institution will require full coverage. One financial consultant recommends if the insurance costs 15% or more of the cars value, don’t insure it. Have your agent price it with different deductibles and make an informed choice.
As long as you live in your parent’s household you are covered under their homeowners insurance. If you buy a house and assume a mortgage, your lending institution will insist you purchase homeowners insurance. However, if you rent a house or apartment of your own, you will have a decision to make – should you buy renters insurance or not? (A landlord’s policy does not include personal belongings.)
While many graduates don’t own a lot of personal property, you’d be surprised at the value of what you own. Think of a music collection, or your wardrobe and what it would cost to replace them. A renters policy provides coverage if these things are stolen or destroyed In addition, it protects against injury and damage for which you might be responsible. The premium is relatively inexpensive. If you buy renters insurance from the same company that insures your car, there is often a multi-policy discount! Often times, this discount nearly pays the full premium for the renters policy.
Consider different deductible amounts and see which one offers the best combination of protection and economy. If you’re unsure what option best fits your needs, call your agent and have them walk you through it.