Recent Graduates May Benefit from Health, Life Insurance

Part II in a Series for Graduating Seniors

There's a reason recent high school and college graduates are called "young invincibles."

These individuals are often enjoying their peak health, and consequently are not compelled to purchase the health insurance necessary to protect it. A 2008 report from the Centers for Disease Control and Prevention showed that there are about 13 million Americans age 20 to 29 who did not have such coverage. This represents a 30 percent uninsured rate.

Because they don't have the coverage to pay for prescriptions or physician visits, many of these young invincibles do not get the medical attention they need, until they land in an emergency room. The report showed that uninsured women were significantly more likely than men to forgo their health care needs because of cost.

It doesn't have to be this way.

Having the right types of insurance can help recent high school and college graduates protect their personal health and finances down the road. Health and life insurance premiums are often lower for these individuals, many of whom have avoided long-term medical conditions.

One affordable approach is to pair a health-savings account with a high-deductible health insurance plan. HSAs were first introduced in 2003 and enable individuals to pay for medical costs free from taxes. Consumers are not the only ones attracted to this type of health plan, according to Kiplinger's Personal Finance Contributing Editor Kimberly Lankford.

"More employers are offering high-deductible plans to employees during open-enrollment period, too, and some even contribute money to an HSA to encourage employees to sign up," Lankford wrote in a recent report.

Still, those who take this approach should be prepared to make large out-of-pocket payments. Individuals who want an HSA in 2010 are required to have a deductible no lower than $1,200, while families must have deductibles of at least $2,400.

Young adults are often bumped off their parents' health insurance when they graduate from high school or college. This will no longer be the case starting this September. A provision in the recent Patient Protection and Affordable Care Act will soon allow young adults to remain on their parents' plans until they reach age 26.

Some major health insurers have voluntarily decided to offer such protection in advance of the September date, shielding young adults from a possible coverage gap. Department of Health and Human Services Secretary Kathleen Sebelius commended these efforts.

"Insuring younger Americans is a top priority for the administration, and we will continue working to expand the opportunity for children and young adults to have access to quality, affordable care," she said.

The long life expectancy ahead of recent high school and college graduates may make life insurance coverage more affordable for this group, as well. Such policies are available in term and whole varieties, and may reflect an individual's specific debt and investment goals.

Term life insurance is a more affordable option, making it suitable for those with young dependents or mortgage loans. Whole and universal coverage typically include greater investment opportunities and may be used as a source of income later in life. Consumers who buy such coverage early can build up significant savings over time.

Insurance lawyer Frank Darras recommended that parents consider a life insurance policy as a gift for their graduating high school or college student.

"Buy sooner rather than later," Darras said. "The younger and healthier the person is, the lower the rates."

Experts also recommend that those who invest in life insurance review their policy periodically to make sure that appropriate beneficiaries are included. This may, however, result in increased premiums for those whose health has worsened since buying the coverage.

Insurance Information for Graduates, Part I:
Auto and Home Insurance for the Recent Graduate
Are You Currently Insured?