If you decide coverage is warranted, look for a term policy that covers the amount of the debt for the full repayment term, said CFP Carrie Jones, a senior planner with Life Planning Partners in Jacksonville, Fla.
Even though the amount at risk diminishes over time as the grad repays his or her loans, applying for one policy is typically less expensive and easier to manage than a layered strategy, she said. That would be, for example, covering a $50,000 co-signed loan balance with one $25,000, 20-year life insurance policy and another $25,000, 10-year policy.
“It’s actually cheaper to keep a $50,000 policy for 20 years,” Jones said. “A $50,000 policy is not twice as much as a $25,000 policy.”
But if you’re concerned, some insurers will let policyholders reduce the amount of coverage, one or more times over the term of the policy, said Ryan of Ryan Insurance Strategy Consultants.
“When shopping, that should be a question they ask,” he said.