Insuring the future
Asking for choices, options is key when looking for insurance
Tara Cegla
Issue date: 4/6/09 Section: Money/Health
As students are nearing their graduation goals this spring, one of the last things on many of their minds is what they will do when they are no longer eligible to stay on their parents' insurance plans.
Dale Peters, lecturer for the Department of Accounting and Finance, specializes in insurance and typically gives his students an assignment - seeking out different insurance agents for their specific needs on different types of policies.
"The young, single person right out of school doesn't need a million dollars worth of insurance, but it is important to set up some," Peters said.
Peters said the most important insurance young people need are health, life, auto and renter's insurance.
Health Insurance
Peters said health insurance is easily obtained through an employer, though he knows this isn't always an option. When students graduate, they aren't able to remain on their parents' health insurance plans but might not have insurance through a company or have a job secured yet.
If a person is insured by his or her employer, Peters said there are several services the plan should cover, such as the network of doctors and the types of services available, Peters said.
Also, Peters suggests taking higher deductible and lower premium. People who choose this option generally are in better health that don't have a lot of medical expenses, Peters said.
The premium is the monthly payment in health insurance plans, while the deductible is used in the event of needing various health services.
"You're a younger person and generally healthier; you shouldn't be afraid to take the higher deductible and the higher co-pays … (so that) the premium that you pay out of pocket will be lower." Peters also said that looking into a 125 flexible spending account through an employer could be invaluable to many people.
For those without jobs, Peters recommends going with a catastrophic health insurance plan with a high deductible, since it is only for the most expensive medical services.
Chris Cayo, owner of Cayo Insurance Agency on Water Street, said there are several other options for health insurance if someone is unemployed.
One is the major medical plan, which exists until the owner decides to cancel it. When selecting this plan, the individual must fill out a 50-question medical history survey so that the insurance can cover anything that has happened in the last five years, Cayo said.
The other is a short-term plan, which only exists for a specified amount of time.
"It's great for when you just need a specific period of time," Cayo said. "But if you keep renewing it, it will become more expensive."
One instance Cayo said this type of plan would be beneficial is if someone has been hired with a company but isn't eligible for insurance until a specific day. That way, the new employee only has to sign up for the insurance until that day.
The short-term plan is less expensive, around $75 compared to the major plan costing around $100, but there is one disadvantage.
"Major medical plans ask more medical questions and cover those conditions, while short-term won't cover preexisting conditions," Cayo said. An example of this, Cayo said, is if a person had some type of surgery in the past five years and was beginning to have complications with it, short-term medical insurance would not cover any of the medical expenses, whereas a major medical plan would.
Peters said disability insurance is another type of insurance that employers can offer, and it is often the most overlooked type of insurance to young people.
"Your biggest asset is being able to earn more money in future years," Peters said.
"Should you have an accident or an illness that can prevent you from work, that can have a devastating impact on your earning potential. The way you protect that is disability insurance."
Peters said disability insurance is fairly inexpensive for those just graduating, since they're healthier and younger. Also, this insurance pays for a part of a person's wages that are lost due to an accident or illness.
Life Insurance
Few young people think to open a life insurance policy immediately after college, but Peters said he thinks it's beneficial, especially as people begin owning and making more money.
"Now that you're leaving school and becoming responsible for your own life, it's important to have money available to your estate … should something happen," he said.
There are two types of life insurance, one being whole life. Peters said it operates similarly to a savings account, that someone and his or her employer can add money to this account, and all of it will be available to the estate and family members.
The other type of life insurance policy is term life, which is available through an employer. This policy has a much lower annual payment. If something were to happen to the holder, the amount gets paid out, padding that works similarly to car insurance. There's no savings component; once a person stops paying, the coverage is up.
Peters said whole life costs more than term life, it's much cheaper to buy the younger a person is. He also said it's important to have a mix of both types of insurance, in case a person loses his or her job.
However, Cayo said he doesn't think it's a top priority for most young people, with so many other expenses to pay for.
Auto Insurance
If looking to buy a car and needing to take out a loan, financial institutions require proof of insurance before granting the loan.
"It protects you for damage or injury that you cause other people or property, and it also covers the vehicle itself should it become damaged," Peters said.
There are two types of auto insurance: liability and comprehensive insurance.
"If you run over someone, liability covers the body injuries and medical care, which can be very substantial … whereas the comprehensive and collision only relates to your vehicle," Peters said. Again, he stressed the importance of always having the higher deductible and the lower premium, since the deductible is only used when needed.
Also, Peters said shopping around can save you hundreds of dollars, but there are other factors that account for pricing. Some of these include academic success, marital status and past driving record.
Cayo said another factor is the type of vehicle someone is driving.
"You should get insurance prices before you make the purchases," he said. "If it looks sporty, it's going to cost more." Cayo also said motorcycle insurance costs significantly more than car insurance.
Another aspect Cayo wants to remind students of is running deliveries at work with a personal car.
"If you take a delivery job using your vehicle, contact your agent and be prepared for insurance prices doubling," he said.
Homeowner's and Renter's Insurance
As graduating students begin to move out of college housing and potentially start to think about buying a home, Peters said homeowner's insurance is a no-brainer.
"It's not only protection from the building, but protection of you," he said, which includes anyone trying to sue a homeowner for an accident occurring on their property.
Senior Nick Wellenstein owns two properties in Eau Claire and has comprehensive coverage.
"I've had a few minor issues like a broken window," he said. "I've called my insurance agent, and he said, 'you don't want to use your homeowner's insurance for that. Save it for bigger issues.'"
For renter's insurance, Cayo said it's an important thing to have for students living off-campus, especially if they own nicer electronics like a stereo or laptop.
If, for instance, a student has his or her $1,500 laptop stolen, he or she can receive all that money back, so long as the extra coverage was included in the agreement. Renter's insurance typically costs $150 a year, and the extra coverage costs an extra $15 a year.
Advice
The best advice Peters has for young people selecting new insurance plans is to shop around and to always take the highest deductible.
"They should talk with their parents and their insurance professional on what their insurance needs are," Peters said.
Cayo said it's important to look at all the available options in order to make the smartest decision.
"No matter what type of insurance you're buying, ask for choices and options to look at the cost and benefit," Cayo said. "What would the next level of insurance cost? What would the next deductible cost?" Also, Cayo said good credit affects the price of auto and home insurance.
While Wellenstein receives his insurance through a family friend, he said it's still important for young people to know what, exactly, they're doing.
"Talk to somebody right away," Wellenstein said. "Make sure you have all your ducks in a row and keep in good communication with your insurance agent."
Dale Peters, lecturer for the Department of Accounting and Finance, specializes in insurance and typically gives his students an assignment - seeking out different insurance agents for their specific needs on different types of policies.
"The young, single person right out of school doesn't need a million dollars worth of insurance, but it is important to set up some," Peters said.
Peters said the most important insurance young people need are health, life, auto and renter's insurance.
Health Insurance
Peters said health insurance is easily obtained through an employer, though he knows this isn't always an option. When students graduate, they aren't able to remain on their parents' health insurance plans but might not have insurance through a company or have a job secured yet.
If a person is insured by his or her employer, Peters said there are several services the plan should cover, such as the network of doctors and the types of services available, Peters said.
Also, Peters suggests taking higher deductible and lower premium. People who choose this option generally are in better health that don't have a lot of medical expenses, Peters said.
The premium is the monthly payment in health insurance plans, while the deductible is used in the event of needing various health services.
"You're a younger person and generally healthier; you shouldn't be afraid to take the higher deductible and the higher co-pays … (so that) the premium that you pay out of pocket will be lower." Peters also said that looking into a 125 flexible spending account through an employer could be invaluable to many people.
For those without jobs, Peters recommends going with a catastrophic health insurance plan with a high deductible, since it is only for the most expensive medical services.
Chris Cayo, owner of Cayo Insurance Agency on Water Street, said there are several other options for health insurance if someone is unemployed.
One is the major medical plan, which exists until the owner decides to cancel it. When selecting this plan, the individual must fill out a 50-question medical history survey so that the insurance can cover anything that has happened in the last five years, Cayo said.
The other is a short-term plan, which only exists for a specified amount of time.
"It's great for when you just need a specific period of time," Cayo said. "But if you keep renewing it, it will become more expensive."
One instance Cayo said this type of plan would be beneficial is if someone has been hired with a company but isn't eligible for insurance until a specific day. That way, the new employee only has to sign up for the insurance until that day.
The short-term plan is less expensive, around $75 compared to the major plan costing around $100, but there is one disadvantage.
"Major medical plans ask more medical questions and cover those conditions, while short-term won't cover preexisting conditions," Cayo said. An example of this, Cayo said, is if a person had some type of surgery in the past five years and was beginning to have complications with it, short-term medical insurance would not cover any of the medical expenses, whereas a major medical plan would.
Peters said disability insurance is another type of insurance that employers can offer, and it is often the most overlooked type of insurance to young people.
"Your biggest asset is being able to earn more money in future years," Peters said.
"Should you have an accident or an illness that can prevent you from work, that can have a devastating impact on your earning potential. The way you protect that is disability insurance."
Peters said disability insurance is fairly inexpensive for those just graduating, since they're healthier and younger. Also, this insurance pays for a part of a person's wages that are lost due to an accident or illness.
Life Insurance
Few young people think to open a life insurance policy immediately after college, but Peters said he thinks it's beneficial, especially as people begin owning and making more money.
"Now that you're leaving school and becoming responsible for your own life, it's important to have money available to your estate … should something happen," he said.
There are two types of life insurance, one being whole life. Peters said it operates similarly to a savings account, that someone and his or her employer can add money to this account, and all of it will be available to the estate and family members.
The other type of life insurance policy is term life, which is available through an employer. This policy has a much lower annual payment. If something were to happen to the holder, the amount gets paid out, padding that works similarly to car insurance. There's no savings component; once a person stops paying, the coverage is up.
Peters said whole life costs more than term life, it's much cheaper to buy the younger a person is. He also said it's important to have a mix of both types of insurance, in case a person loses his or her job.
However, Cayo said he doesn't think it's a top priority for most young people, with so many other expenses to pay for.
Auto Insurance
If looking to buy a car and needing to take out a loan, financial institutions require proof of insurance before granting the loan.
"It protects you for damage or injury that you cause other people or property, and it also covers the vehicle itself should it become damaged," Peters said.
There are two types of auto insurance: liability and comprehensive insurance.
"If you run over someone, liability covers the body injuries and medical care, which can be very substantial … whereas the comprehensive and collision only relates to your vehicle," Peters said. Again, he stressed the importance of always having the higher deductible and the lower premium, since the deductible is only used when needed.
Also, Peters said shopping around can save you hundreds of dollars, but there are other factors that account for pricing. Some of these include academic success, marital status and past driving record.
Cayo said another factor is the type of vehicle someone is driving.
"You should get insurance prices before you make the purchases," he said. "If it looks sporty, it's going to cost more." Cayo also said motorcycle insurance costs significantly more than car insurance.
Another aspect Cayo wants to remind students of is running deliveries at work with a personal car.
"If you take a delivery job using your vehicle, contact your agent and be prepared for insurance prices doubling," he said.
Homeowner's and Renter's Insurance
As graduating students begin to move out of college housing and potentially start to think about buying a home, Peters said homeowner's insurance is a no-brainer.
"It's not only protection from the building, but protection of you," he said, which includes anyone trying to sue a homeowner for an accident occurring on their property.
Senior Nick Wellenstein owns two properties in Eau Claire and has comprehensive coverage.
"I've had a few minor issues like a broken window," he said. "I've called my insurance agent, and he said, 'you don't want to use your homeowner's insurance for that. Save it for bigger issues.'"
For renter's insurance, Cayo said it's an important thing to have for students living off-campus, especially if they own nicer electronics like a stereo or laptop.
If, for instance, a student has his or her $1,500 laptop stolen, he or she can receive all that money back, so long as the extra coverage was included in the agreement. Renter's insurance typically costs $150 a year, and the extra coverage costs an extra $15 a year.
Advice
The best advice Peters has for young people selecting new insurance plans is to shop around and to always take the highest deductible.
"They should talk with their parents and their insurance professional on what their insurance needs are," Peters said.
Cayo said it's important to look at all the available options in order to make the smartest decision.
"No matter what type of insurance you're buying, ask for choices and options to look at the cost and benefit," Cayo said. "What would the next level of insurance cost? What would the next deductible cost?" Also, Cayo said good credit affects the price of auto and home insurance.
While Wellenstein receives his insurance through a family friend, he said it's still important for young people to know what, exactly, they're doing.
"Talk to somebody right away," Wellenstein said. "Make sure you have all your ducks in a row and keep in good communication with your insurance agent."
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