Student loans and disability insurance go hand-in-hand

By Frank N. Darras

DarrasLaw


According to Fidelity.com, approximately 70 percent of college students are graduating with debt in 2013. At age 18, students are often still dependents, so loans can’t be taken out without a cosigner, which is often a parent or guardian. Therefore, if any of those students default on their loan due to a disabling sickness or injury, the cosigner will be responsible for continued payments. Instances like these make disability insurance a major financial consideration.

Your clients trust you to provide them with professional advice for their whole family. Check with your clients to see if they have cosigned any student loans. If you are their primary insurance agent, you should provide them with helpful information that may save them money. Do they have a child that graduated with student loan debt? If so, encourage them to discuss the possibility of a disability insurance policy for that non-working college graduate.

Invite both your clients and their non-working graduates to meet with you so you can examine all the options available. If you offer multiple types of insurance coverage, urge the new college graduate to combine any other insurance they need, such as automobile insurance, as a way to save money. Your client needs to feel like you are offering them the best deal and are providing them with quality service. By offering your clients great customer service involving their children, you have the opportunity to gain another lifelong client.

Discuss the risks of not having disability insurance. Disability insurance will protect both the one with the loans as well as the cosigner. Defaulting on loans can cause havoc with financial plans, along with any borrowing potential and current interest rates on other loans.

The cost of disability insurance is fairly low — only about 1 percent to 3 percent of taxable income. Provide your client with examples of how much insurance they need. To start with, the recent non-working college graduate may only need a modest disability benefit with a future increase purchase option. This can allow them to increase their coverage once they have increased income.

It’s impossible to predict the future, but as an insurance agent, you have the satisfaction of protecting people’s financial future in the event of a disabling sickness or injury. Once your client's graduate enters the working world, be sure they have disability protection.

See also: Student loans: another smart reason for disability insurance