Students stepping out into the big wide world know very little about how it works. Insurance is something the majority of students have never had to deal with before. It’s why the only knowledge you have might come from the mainstream media and hearsay. This makes it easy to make mistakes and take out the wrong policy.
Whilst experience is always the best teacher, it’s better for you if you can avoid learning some harsh lessons from the beginning. Insurance is complicated for even the most adept adult. Here are some tips for taking out any type of insurance policy.
What do you want?
Health insurance, life insurance, and auto insurance are just three major types of insurance. You don’t need every type of insurance right now. As someone who doesn’t own a home yet, you don’t need home insurance. What you will need are health insurance and some contents insurance policies.
Consider your situation and what you need to protect which could conceivably be put in danger.
Is it viable?
The insurance industry earns so much money because of fear. Irrational fear sends people straight to their local insurer. Take a deep breath and stop getting hysterical. What are the odds of being attacked by the mafia or killed by a new epidemic? Not very high. The chances are you won’t be unfortunate enough to encounter any of these scenarios. Ignore the statistics and the paranoia on the mainstream news.
Some things you don’t want to insure. It’s not worth insuring a few gadgets if you never take them out of your room, and paying the insurance premiums over a sustained period would cost more than the gadgets themselves.
Risk vs. cost
We touched on it in the last paragraph. Getting a good deal on your insurance doesn’t mean it’s still a good deal in the long-term. Most gadgets plummet in value after just a few months.
There’s no point taking out a policy against your laptop for the next two years because the premiums will outweigh the cost of buying the same laptop again. Essentially, you are paying the insurance company for doing absolutely nothing.
Keep insurance to things which rise alongside inflation or things you can’t easily replace.
Certain policies and financial services have little add-ons attached. If you pay for a specific health insurance policy, you can get dental insurance thrown in for free. Other services include paying a higher credit card rate in exchange for cheaper fees when using it outside of the country.
Your employer might even provide you with insurance. Students studying at a military academy for a career in the army will automatically get insurance just by joining up.
There are some pitfalls to combined insurance. You have to make sure in exchange for extra cover you aren’t inadvertently paying more. It’s easier to have combined insurance policies, but if it causes you to pay more than buying separate policies, you are cheating yourself out of a lot of money.
If you can get combined insurance plans, ask for it. It’s not always marketed widely, and your insurer might not ask if you want additional cover.
The benefit of being a student is you’re in a position where you’re an adult but still have the chance to go back to mommy and daddy for help. See if you can enroll yourself in a family insurance plan.
Car insurance and health insurance policies are the most common for offering family cover. It’s cheaper than getting your own policy as it’s in the best interests of the insurance companies to encourage parents to put their children on a policy. It makes them aware of insurance from an early age and will likely bring them back to the same insurer when they want their own policies.
The insurance industry has hundreds of different policies. Most of these schemes you’ve probably never heard of. Get online and search for policies targeted towards students. Insurers acknowledge students have less money than the average policy holder so you might get discount insurance, as well as more targeted insurance.
Student policies make the most out of every dollar in your pocket.
Comparison sites provide a place where you can compare hundreds of insurers on price. Try entering different levels of cover and various add-ons. This takes into account any discounts currently on offer. It can also stop you from taking out a policy which doesn’t provide value for money.
For example, installing an alarm in your car costs $100. A fully comprehensive policy costs $250 a month without the alarm and $200 if you installed the alarm. Over the first few months, you would make your money back on installing the alarm and save $50 a month after the first two months.
Insurance premiums are deceptive. The small amounts might not seem like much. Add your weekly premiums up and see how much it costs per year. Can you really afford to pay this amount as a student?
Aim to have a certain sized cushion between what you can afford and the limit where you can’t meet the payments. You never know when a difficult financial period might come along out of nowhere.
This is where you have to prepare an accurate budget. Take into account all your expenses and disposable income. Can the premium size quoted fit into this budget comfortably? If it doesn’t, don’t take out the insurance.
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- The Clueless Student’s Guide to Taking Out Insurance - July 14, 2013