You’ve just graduated college. You’re starting your career, finding a place to live, meeting new people, learning what a 401k is… and the “real world” is hitting you in the face. It can be both exhilarating and frightening. But amongst the exciting chaos, recent grads tend to forget (and avoid) one crucial part of this new “adult” life: insurance.
As a recent grad, you may be feeling overwhelmed by all of the new life skills you’re learning. That’s why we’ve created our ultimate guide to property & casualty insurance for the college graduate. We’ll help you understand what insurance is and what kinds of insurance you need. We’ll also answer all the questions that are floating around in your head as you start to build your independent adult life and career – and how you can help protect yourself financially as you make big “adult” purchases.
Insurance helps you to prepare financially for the unexpected. Insurance policies manage the costs associated with the many risks of life, which begin to accumulate the moment you receive your diploma.
What does an insurance policy entail?
An insurance policy creates a contract between you (the policyholder) and your insurance company. This contract says that you will pay a premium, which is the monthly or annual fee for protection; in return, the insurance company will cover a portion of your loss in specific cases of accidents, incidents, damages and claims. The policy will outline the amount and events covered in your plan, so it’s important to read through the entirety of the policy.
Note that this says insurance will cover a portion of costs. Along with your premium, you will have to agree to pay a certain deductible. If you submitted a claim to an insurance policy, the deductible his the amount of money you would have to pay out of pocket before your insurance policy kicks in.
Let’s look at an example.
Say you have an renters insurance policy that covers $15,000 in personal property coverage and $100,000 in liability. You pay $20 per month to keep this policy. This is your premium—or the cost you pay to your insurance company to keep your policy active. You have a deductible cost of $500.
Now let’s say your roommate accidentally starts a kitchen fire and your bedroom is next to the kitchen. The smoke damages many of the belongings you have in there, with damages amounting to $3,000. Based on the policy outlined above, your insurance policy would likely cover the full $3,000—but they will only pay for $2,500. Why? You have to pay $500 out of pocket as your deductible before the insurance company pays the remainder.
What if you needed to replace $20,000 worth of your stuff due to damage? In that case, you’d pay your deductible of $500 and then the insurance company would cover $15,000 in the case of a covered loss, for a total of $15,500. That still leaves you with $4,500 in uncovered replacement costs. Unfortunately, your $15,000 renters policy limit is “used up.” Unless you have a secondary insurance coverage that could help with those specific expenses, you will likely have to pay that $4,500 out of pocket.
That is why having the right amount of coverage is so important to your financial wellbeing. Even if you have an insurance policy, you could still be left in a financially insecure spot if it’s not the appropriate amount of coverage for your situation.
Let’s take a quick look at our insurance terms glossary so far (you can find a larger glossary at the end of this guide):
Premium: The premium is what you pay annually, quarterly, or monthly to keep your insurance policy active.
Deductible: In the case that you have to submit an insurance claim, the deductible is the amount of money you will pay out of pocket before your insurance coverage is applicable.
Claim: A claim is what you submit to your insurance company after an event has occurred. This is the amount of money in damages and a request for funds to reimburse the cost of those bills.
Why do you need insurance?
You’ve just graduated college, and you may feel invincible and untouchable (and maybe also like you’re flat broke with nothing of value to protect…). But unfortunately accidents do happen—especially to those who aren’t properly prepared for them. An insurance policy can help you prepare so that you are not left with exorbitant bills that could cost you your entire livelihood, now and in the future.
Even one car accident could costs thousands—if not hundreds of thousands—of dollars. A house fire could burn every possession you have. Very few people can pay these sorts of costs out of pocket. If you don’t have the money to pay for damages you’ve caused, you could be sued for those damages and forced to pay for them out of each paycheck for years to come. Without insurance, you may be expected to pay the full cost of damage in an accident yourself. With the proper insurance coverage, you can help lower this financial burden and risk.
Ultimately, insurance helps safeguard against cataclysmic losses and expenses that could completely devastate your finances, family, and wellbeing.
In reality, only a small percentage of people will need to use their insurance policies each year. Nevertheless, the costs of a claim can be exorbitant. For example, the average homeowners’ insurance claim in 2015 was $11,402, according to the Insurance Information Institute. That’s a lot of mortgage payments (or avocado toasts) that you would have to pay out of pocket if you didn’t have an appropriate insurance policy.
What are the types of insurance?
There are numerous forms of insurance for different purposes. There are even “alien abduction insurance” and “zombie fund insurance” policies. Most likely those won’t apply to you, though. Below are some types of insurance that could apply to a new grad:
- Vehicle/auto insurance
- Life insurance
- Liability insurance
- Home insurance
- Renters insurance
- Health insurance
Other types of insurance to consider include:
- Umbrella insurance
- Flood insurance
- Mortgage Insurance
- Property Insurance
- Travel insurance
- Pet insurance
- General Insurance
There are other types of insurance you should considering purchasing in specific cases. For example, if you own a motorcycle, you’ll want to take a look at motorcycle insurance. If you live near the water, you may need marine insurance. If you have a side hustle, you may want to consider small business insurance.
Insurance products are often classed by type. The main types are property & casualty, life & health and commercial. This guide focuses on property & casualty, which is insurance that helps cover the things you own, as well as your liability.
When considering the types of insurance you’ll need, consider your lifestyle and the key assets that you hold.
Now that you’re “adulting,” it’s time to think about getting insurance. In fact, insurance coverage is often just as important to consider as your salary and benefits. Insurance helps provide you more stability in an unstable world.
Below you’ll find the questions you should consider and their related insurance concerns to determine what type of coverage policies you’ll need.
Renting a Home or Apartment
If you’re in the majority of college students renting their first home, you’ll need renters insurance. Renters insurance is one of the most common forms of insurance for recent college grads. We’ll take some time to pause here for a thorough review of renters insurance.
What is renters insurance?
Renters insurance helps protect your home, belongings, and wallet from unforeseen incidents. It’s equally as important as homeowners insurance, because it protects your home and your livelihood.
Renters insurance can help cover break-ins, liability from injury, fire or smoke damage, damage to belongings, acts of God, and more. Renters insurance often also helps cover damage to others’ apartments if it was your fault—like fire or water damage that came from your apartment. Your policy may even protect your personal belongings up to a certain amount away from your home, at the gym, in a hotel, etc.
If you’re a grad student living on university soil, you should consider renters insurance, too. Even if you are living in a dorm situation, you are still “renting” that piece of property. Renters insurance will help protect your belongings.
Note that even if your landlord has insurance, you are not protected. Their insurance is to cover the building or any damage caused by tenants. You are still responsible for your own belongings and liability in your home.
Why is renters insurance important?
There are two key aspects to renters insurance. You need to 1) insure your belongings and 2) protect from liability.
If your property was damaged in any way, renters insurance can help cover the cost to replace or repair it. For example, if you burn your ramen noodles and your stove suffers smoke damage, your insurance could help cover the costs to fix it. If you leave a candle burning and it starts a fire, your renters insurance would likely step in to help cover the costs.
You want to ensure that if anything were to happen to your rented home—water damage, fire, vandalism, theft, and more—your possessions are covered. Likely, if you tally up the worth all of your belongings, you’ll find they’re worth a lot more than you think. It would be immensely costly to replace them in the case of an unfortunate incident. A home inventory is one way to accurately add up the value of your belongings, and it is super helpful to have in the case of claim.
Related: The Best Home Inventory Apps
You also need to ensure that you are not financially responsible if someone were to get injured while on the premises your rented property. Even though the landlord owns the property, you are responsible for maintaining upkeep in your own home. If your friend cuts his foot on your kitchen tile, you are liable for his potential medical expenses.
The space in which you occupy—and for which you pay rent—is also your “area of liability.” This means that if someone is hurt, you have to pay out. Legal fees and payouts can be exorbitantly costly. If you don’t have the money to pay the expenses, the court could put a lien on your future assets as well.
That’s where your renters insurance liability coverage would kick in. This can help pay for legal fees and help manage your liability risk.
There’s a third part to renters insurance as well that many recent grads are not aware of.
Trish Vassallo, an experienced InsuraMatch agent, discusses: “A little advertised fact is that a renters policy will typically also afford you coverage for temporary housing if the unit or complex suffers a loss that makes your apartment unlivable. Often students will say, ‘I don’t own enough for it matter.’ But if their apartment suffered smoke damage from a neighboring fire, they would be left paying double the rent while displaced from the apartment during repairs. Most college graduates can’t afford that.”
Basically, if you were forced to leave your apartment for a period of time, whether due to fire, flood, mold, etc., you would have to pay your apartment’s rent as well as the cost of another place to live in the meantime. Insurance can help cover these displacement costs while your home is being repaired.
Learn more about the benefits of renters insurance: Do You Need Renters Insurance?
What should you look for in coverage?
When buying renters insurance, you should consider the following questions:
- How much insurance do you need?
- What are the covered hazards in your plan?
- Does your insurance impact your roommate(s)?
- How much is the value of your belongings?
- What is the coverage limit for your personal belongings?
- Does your policy cover your belongings outside the home?
- What is your coverage line for liability?
- Does it include displacement coverage?
- Does it cover flood and earthquake?
- Do they offer a discount for certain safety features?
- Does your premium increase for pets? How much?
- How do you make a claim?
- What additional coverage is available?
How much does renters insurance cost?
The average renters policy costs only between $15 and $30 per month. That’s 3 to 6 cups of coffee at your favorite hipster coffee shop. We'd say it could be worth giving up a few shots of caffeine to protect your wallet from property damage or liability expenses.
Renters insurance bottom line
You need renters insurance to protect your current and future financial wellbeing. In essence, renters insurance helps safeguard in the case of damage to people or property. Learn more about renters insurance in our articles: Rental Insurance Questions To Ask A Landlord and Best Tips For Getting A Renters Policy.
Buying Your First Home
If you plan on purchasing a home, you’ll need to look into homeowners insurance. This can be a more complex buying process, so check out our First Time Homebuyers Guide To Homeowners Insurance.
Living at Home with Mom & Dad
If you are living at home (and not paying rent), you don’t need homeowners or renters insurance yet. However, you may still want to consider an umbrella policy to help cover your own personal inventory and possessions outside of your family’s assets. An umbrella policy can also help protect you against bodily injury, property damage, slander, and false arrest.
Vassallo says college grads should always consider an umbrella policy to cover current and future assets. Even if you don’t have a lot of current assets, a lien can be placed on your future assets and income if you are faced with a significant financial situation, like personal liability claims. Umbrella policies cover “the rest of the risk” to protect your entire livelihood.
If you will be driving, you’ll need to compare auto insurance policies. If you live at home, you may be able to get a multi-line family discount on your auto insurance.
Check out our Ultimate Guide To Buying Auto Insurance to learn more. Here’s a quick overview of the types of auto coverage you should consider:
- Bodily injury liability (required): covers medical expenses if another party (or parties) is injured in an auto accident where you are found at fault
- Property damage liability (required by most states): covers property damage expenses if another party’s property is damaged in an auto accident where you are found at fault
- Personal injury protection (recommended): covers your own medical expenses related to an auto accident regardless of who is at fault
- Collision coverage (recommended): covers damages to your own vehicle if your car is involved in some sort of collision
- Comprehensive coverage (recommended): protects from all incidents other than collision, aka “acts of nature,” that could damage your vehicle
- Uninsured and underinsured motorist coverage (recommended): covers your own medical or property costs associated with an auto accident, if the other party doesn’t have the proper insurance
If you plan to be a driver in a carpool, you should consider a higher line of liability insurance. If someone were to get injured while you were driving, they could sue you for a hefty sum. Make sure you have the appropriate amount of coverage to protect from those costs.
If you’ll be taking the bus, you won’t need vehicle insurance. Nevertheless, you may want to talk to an insurance agent about specific healthcare policy concerns.
For example, if you are injured in an auto accident while on public transportation, you may not get any money from the government to pay for your medical bills. In this case, your health insurance coverage would need to cover any expenses related with this sort of auto accident. This can also be true for carpooling when you will not be a driver.
If you’ll be biking, whether to work or for fun, you need to consider bike insurance to protect from any accidents or property damage. Check out our article Insurance Tips For Your Bike to learn more.
Shopping for Property & Casualty Insurance
The number one rule of insurance shopping is to compare. You should always compare multiple quotes to find the best deal. The best “deal” doesn’t mean the lowest price; it means the greatest package of covering for your needs at the least expensive price. Don’t go with the first rate you hear. Comparing quotes will ensure you find the right solution with the appropriate ratio of coverage to price.
Working with an agent can be a great way to find the right insurance for your needs. By reaching out to an independent insurance agency, like InsuraMatch, an agent will help you compare multiple quotes in just minutes. You’ll save time and money, and hopefully find your “match.”
FAQs (that we get from every college grad)
Should I pay more in premiums or risk the deductibles?
Raising your deductible can help lower your premium costs, however, you will owe more out of pocket if you need to file a claim. Having a deductible you can't afford won't do you much good if you need to file a claim. If you are tempted to raise your deductible, consider saving your premium savings in case you need to pay a claim.
Should I “bundle” my insurance?
Bundling your insurance is a great way to save money and simplify the claims process. You work with one company for a chunk of your insurance, which gives you a better relationship with that branch. We always recommend comparing quotes with home/renters and auto bundled together. Learn more about the benefits of bundling here.
How much should I be spending on insurance?
There is no hard number for what you will spend on your insurance. It all depends on your living, transportation, and working situation. If you’d like to save money on your insurance costs (who doesn’t?), read the article 16 Ways To Lower Your Insurance Premium.
The Bottom Line
Understanding and comparing insurance is among the many challenges that occur in the “real world” after graduation. Don’t get overwhelmed or stressed—but don’t neglect your potential risks either. Don’t procrastinate like you did with your finals studying...
Get a free quote with InsuraMatch in 10 minutes or give us a call at 844-232-2700.
Insurance: A contract between policyholder and company, where you pay a premium in return for coverage of specific losses or damages
Auto Insurance: a variety of policies that help protect your finances in the case of an auto accident or damage
Auto Bodily Injury Liability: (required by most states) covers medical expenses if another party (or parties) is injured in an auto accident where you are found at fault
Auto Collision Coverage: covers damages to your own vehicle if your car is involved in a covered collision
Auto Comprehensive Coverage: protects from covered incidents other than collision, aka “acts of nature,” that could damage your vehicle
Auto Personal Injury Protection: covers your own medical expenses related to an auto accident regardless of who is at fault
Auto Property Damage Liability: (required by most states) covers property damage expenses if another party’s property is damaged in an auto accident where you are found at fault
Auto Uninsured/Underinsured Motorist: covers your own medical or property costs associated with an auto accident, if the other party doesn’t have the proper insurance
Claim: a request for funds to reimburse the cost of your bills in the event of an insurance-related incident
Deductible: amount of money you will pay out of pocket before your insurance coverage is applicable for an insurance claim
Displacement coverage: covers costs for living expenses if you had to vacate your apartment due to some form of damage
Life Insurance: pays a lump sum to your loved ones, beneficiaries, in the case of death; term or permanent life insurance
Long-Term Disability: provides you with an income for a set period of time if you become totally disabled from illness or injury and are unable to work
Premium: the cost you pay annually, quarterly, or monthly to keep your insurance policy active
Renters Insurance: covers your belongings and liability if you rent your home
Renters Liability: covers expenses if someone were to get injured in your home and sue you for damages
Renters Property Damage: a policy that will cover the contents of your home in the case of damage
Shopping: comparing quotes to find the best coverage to price ratio
Short-Term Disability: covers expenses for short period if unable to work due to a disability
Umbrella policy: additional insurance that can protect your personal inventory as well as safeguard against bodily injury, property damage, slander, and false arrest
Workers’ Compensation: employer-provided insurance that gives wage replacement and benefits if injured on the job