New Graduate 2025 Checklist: Caps, Gowns & Insurance Coverage
By Michael Giusti
Graduation is full of pomp, circumstance, and insurance opportunities. As the Class of 2025 accepts their diplomas and enters a new phase of their lives, a handful of insurance issues should be toward the top of their summer to-do list.
Health, renters, auto, travel, and sometimes even life insurance all present opportunities for graduates to start their post-grad era on a safe financial footing. But understanding all of those issues can be challenging. In this help guide and checklist for recent graduates, we will run through some of the topics and details recent graduates need to consider when it comes to insurance.
Topic: Health Care
After college, graduates would do well to sit down and go over a number of options. The main options to consider include staying on their parent’s plan, buying into a group health plan offered by an employer, and shopping for their own Affordable Care Act plan. Each option has it’s pros, as well as additional things to consider.
In general, people have to wait until the annual open enrollment period to change or enroll in a health plan, but graduating, starting a new job, and moving to a new ZIP code all qualify as qualifying life events, which allow open enrollment periods to be waived.
Option: Stay on parent’s plan
A major part of the Affordable Care Act is the ability of a child to stay on their parent’s health insurance until age 26. If the child is going to stay relatively close to home, this should typically be the first option to consider. Adding a child to a health plan is almost always less expensive than getting an entirely new plan.
The drawbacks come in the form of coverage networks. Some parent’s plans are geographically limited. While there is a great coverage network near where they live, once someone lives outside that same metro area, and certainly outside that home state, options can dwindle fast. The parent’s plan would cover emergency care anywhere in the United States, but access to in-network providers may not be possible outside the parents’ home community.
Sometimes insurers will allow dependents to purchase access to wider coverage networks, but that isn’t an option for every policy.
Pros:
- Generally the lowest cost
- Easy. -no switching required
Cons:
- May have a limited coverage network
- Only available until age 26
Option: Employer Group Health
When graduates begin their careers, many employers offer group health care as an employment benefit. Generally, these plans are heavily subsidized for the employee, with the employer often paying for half or more of the cost of coverage.
Employer-sponsored health tends to come in “metal” tiers – typically bronze, silver, gold, and sometimes platinum. Many also offer a low-premium high-deductible health care plan. The rule of thumb is that the higher the tier, the more expensive the monthly premiums get, but the lower the tier, the more expensive the cost-per-service, deductible, and co-pays tend to be.
Young healthy graduates rarely benefit from the highest tier plans, which tend to be designed for patients with chronic conditions or who spend many days a year in the hospital.
The healthiest graduates can often opt for the high-deductible plan. With these, the graduate pays out of pocked for most health care until they hit their deductible, at which point the insurance starts paying a set percentage of costs from that point on. The benefit is that the monthly premium is drastically lower than the other metal tiers.
High deductible plans are often a good option for healthy young people who aren’t on a lot of maintenance medications and who don’t have to interact with doctors much beyond annual screenings. Many employers pair their high deductible health care plan with health savings accounts – a tax-deferred plan much like a 401(k) plan, but to pay for annual health expenses.
It is important to pay attention to provider networks and drug formularies. Paying less for a premium doesn’t make sense if it means access to the preferred doctor or prescription would be limited.
Regardless of whether the employee opts for a metal tier or a high deductible plan, the quality of care is the same – only the costs differ. All of these plans are governed by the Affordable Care Act, meaning that birth control, preventative screenings, and vaccines are all offered at no cost, and nobody can be turned away because of a pre-existing condition.
Pros:
- Premiums subsidized by employer
- Generally, three or more tiers of coverage options
- Coverage network customized to the community the job is located in
Cons:
- Can be more expensive than just staying on a parent’s plan
- Not all employers offer group health coverage
Option: ACA Marketplace Plan
If staying on a parent’s plan isn’t going to work, and if their employer doesn’t offer a group health plan, the next place to turn is an Affordable Care Act Marketplace plan from Healthcare.gov.
Each state offers Marketplace plans, which are tailored for the state they are purchased in. To help cover the cost, Marketplace plans come eligible for premium tax subsidies, depending on the buyer’s family income.
Depending on how much the graduate earns, some — or in some cases, all of the cost of the insurance can be covered by a premium subsidy. The only catch with Marketplace plans is that if someone has access to an employer-sponsored plan, they become ineligible for the premium subsidy. That means they can still buy a Marketplace plan instead of their employer’s plan. They just have to pay full cost for it.
Pros:
- No pre-existing condition exclusions
- Available in every state
- Coverage network customized by the state they are sold
- Premium subsidy often helps pay for coverage
Cons:
- Subsidy is based on income, so not available for every level of income
Topic: Renters and Homeowners Insurance
Renters and homeowners insurance offer essentially the same type of coverage, with the main difference being who owns the actual building.
Homeowners policies include coverage for the actual building. Aside from that, though, both are very similar policies. Homeowners coverage can be very expensive depending on which community the home is in, but it is required by banks as a condition for getting a mortgage. Renters insurance is much less expensive. Both homeowners and renters insurance include a slew of coverages that benefit graduates.
The primary thing these policies protect is the graduate’s property. For example, if a fire damages a couch, or if a broken window lets rainwater destroy a television, those things would be covered by the renters policy. Renters policies also protect graduates from thieves taking their property, even when that property is not at home.
Some high-value items, such as electronics or collectables have coverage limits – meaning that if the graduate has some especially valuable property, they may need to add riders to ensure they have enough coverage.
Some built-in but less thought of coverage is also beneficial for recent graduates. For example, renters and homeowners insurance carries liability protection. This protects from physical damage to other people’s property or injuries to other people the graduate might accidentally cause. It also protects from defamation, so if a graduate writes something libelous on a Yelp review, these policies would protect them.
Renters and homeowners policies also offer basic medical payments in case someone is accidentally injured or falls ill as a guest in the graduate’s house.
And many policies offer loss of use coverage, which would pay for additional living expenses in the case the graduate can’t access their home because of a covered peril, such as if it were struck by lightning and needs to be repaired.
Renter’s policies only protect the people named on the policy, so roommates generally need their own policies.
Regardless of whether the coverage is through a renters policy or a homeowners policy, neither protect the graduate from floods or earthquakes. Protection from those need to be purchased as separate add-on policies, especially if the graduate is living in an earthquake prone city or in a basement apartment.
Pros:
- Rental insurance is generally very affordable
- Protects contents from damage and theft
- Offers liability protection
- Offers basic medical payments in case a guest is injured or falls ill in the home
- May offer loss-of-use protection if the home can’t be lived in
Cons:
- Every roommate generally needs their own policy
- Won’t protect against floods or earthquakes
- High-value items may require additional coverage riders
Topic: Auto Insurance
If the graduate plans to drive, they need to have auto insurance, especially if they own their own vehicle. If they simply plan to regularly drive someone else’s vehicle they might be able to get by being added as a listed driver on the owner’s policy.
Rates for auto insurance differ widely depending on where the person lives, their driving record, and their demographics, such as age and gender. Other demographics, such as race and religion are strictly prohibited to be considered as part of the auto premium calculation.
Rates also differ depending on what type of vehicle is covered. Newer vehicles that would cost more to repair or replace tend to cost more to insure.
Some insurance companies, though not all, rely on the driver’s credit rating to set their premium, so it makes sense for new graduates to shop around with many different companies. Some will offer premiums that make more sense depending on each driver’s unique situation.
Many insurers in some states also offer usage-based insurance. This is where the driver only pays to insure the number of miles that are actually driven, based on on-board sensors in the vehicle. Others offer telematics-based discounts, where the insurer uses an app or an installed sensor to monitor the driver’s behavior for a set amount of time and then rewards them for safe driving habits.
In some cases, it may behoove the graduate to return to driving school and get a driver’s ed course, especially if it has been a number of years since they started to drive, because many insurers offer discounts for that refresher course.
It often makes sense to bundle different insurance lines, such as renters and auto to get the deepest discounts, though it isn’t always the best deal.
Many vehicle safety features also net some discounts. Some pay for themselves in just a few months, such as getting VIN etching at the time of purchase.
It is important to remember that auto insurance typically if for personal use only. If the graduate wants to make a little money on the side in the gig economy and drive for an app, they need to let their insurer know. Many offer add-on coverage for that commercial use of the vehicle. But on the flip side, if the graduate tries to keep the gig driving on the sly and then an accident happens, they will be running the risk of not being covered and of being dropped by their insurer.
Topic: Life Insurance
If the recent graduate is jumping into family life and is thinking about getting married and adding kids, life insurance is a good way to protect those young family members in case one of the parents were to die and the surviving family members would be in a bind without their income. Similarly, some young graduates are caretakers for elderly parents or disabled relatives.
In each of these cases, people would be in a bind if the graduate were to pass away early and no longer be available to take care of the people who rely on them.
Generally, term life insurance makes the most sense here.
Term life can be thought of as a “rental policy,” where the policy lasts for a set term – say 10, 20, or 30 years. Then after that term, the policy expires, and if the policyholder wants to continue coverage, they need to renew the policy and go through a whole new underwriting period. Term policies are the least expensive option, especially for healthy young buyers.
But young parents and caretakers aren’t the only people who might benefit from life insurance.
Inexpensive term life insurance policies also make good sense if someone has helped the graduate financially launch their lives in the form of a loan that needs to be repaid.
Some family members help pay for college, or they take out private student loans on behalf of the student. Other times family members help pay for down payments on a home, or to help launch a business.
If the family member expects to be paid back and would be in a bind if the graduate were to die, buying an inexpensive term life insurance policy would make sense here, too. The graduate can purchase the term policy and name their family member as the beneficiary, and that can add a layer of protection that might set everyone’s minds at ease.
The other case for life insurance is to help with estate planning and retirement planning. And while those are often far-off goals for new graduates, there is a bit of irony. While these goals may not be top of mind, if the graduate is able to buy a permanent life insurance policy, such as a whole life, universal life, or variable life policy, they would be locking in the absolute lowest premium for the life of the policy. But that all depends on the graduate having the disposable income to make those payments, which isn’t always possible as the young graduate is launching their financial lives.
Pro:
- Can protect dependent family members
- Can protect people who lend money to help the graduate launch their lives
- Can lock in lowest premiums if the graduate can afford to work ahead
Con:
- Term policies expire after a set amount of time
- Permanent policies can be seen as a financial luxury as young people are launching their lives
Topic: Travel Insurance
If a post-graduation celebratory trip is in order, travel insurance may also be a good option to consider. Whether the trip is a European Grand Tour, an all-expenses paid resort, or a jungle adventure, travel insurance may be a good option to protect the financial investment of that trip.
In general, travel insurance pays for non-refundable up-front costs in case some unforeseeable event gets in the way of the trip.
Depending on the details, travel insurance may or may not be the right fit for the trip.
If the trip is a series of hotel stays and flights, travel insurance may not make as much sense because most hotels and airlines have generous refund and rebooking policies already. That said, travel insurance would help with this type of trip when it comes to delays, lost baggage, and medical emergencies, though.
On the other hand, if the trip requirs up-front costs, such as a home rental or all-expenses-paid resort that required a big, upfront nonrefundable deposit, travel insurance shines.
Travel policies kick in if something unpreventable prevents the travelers from taking the trip. This could be a weather event making the destination unlivable, or if the travelers were to fall ill and not be able to make it.
Travel policies also protect against travel delays and lost baggage.
And if the trip takes the graduates outside their health insurance’s home coverage area, many policies offer a health component that protects them if they fall ill and need medical care.
Good policies can often be purchased from the travel site the trip was booked through. They can also be purchased through third parties after all the plans are set, though it is important to shop for those quickly because many policies require they be purchased within a few days of the trip’s details being nailed down.
Travel insurance doesn’t protect against everything, though. In some cases, things like terrorism aren’t covered. Fear of world events is also not covered. The key is to read through what is, and what is not covered before making a purchase.
There are policies known as cancel for any reason, which do just that. However, they often cost more and cover a smaller portion of the trip than more restrictive traditional policies.
Pros:
- Can protect non-refundable portions of a trip
- Can protect against things like illness that can get in the way of a trip
- Protects against travel delays
- Protects against lost baggage
- Can protect against illness or injury during the trip
Cons:
- Not always necessary, especially if most of the trip is covered by refund policies
- Won’t protect against fear of travel or cold feet unless it is a cancel for any reason policy
Topic: Benefits Packages
If the graduate is lucky enough to be starting a career right after school, they may also be lucky enough to have an employer who offers a good benefits package.
Health care tends to be the core of most benefits packages. And for many large employers they offer subsidized group health policies regulated by the Affordable Care Act.
But health insurance isn’t the only insurance benefit new graduates should know about.
Benefits packages also offer group life insurance – typically inexpensive term policies. If term life is the right option for a graduate, it is a good idea to sign up for it initially, and to sign up for the most they can afford. That is because if the graduate waits to sign up later or later wants to increase their coverage, they will likely have to undergo a medical exam to prove insurability, while if they sign up during their initial employment there tends to be a much lower barrier for coverage.
Some packages also include a type of term life called accidental death and dismemberment. AD&D coverage doesn’t protect against death by illness or old age, but it does offer a way to buy a large package of coverage for a relatively small amount, especially for young healthy adults.
Specialized policies protecting against hospitalization and/or major diagnoses such as cancer are also sometimes available.
Vision and dental insurance may or may not be worth it, depending on the coverage and the employer’s subsidy.
Graduates should look at the benefit and the premium to make sure it is worth it. Often vision screenings are already covered under the medical plan making vision unnecessary unless it offers generous coverage for corrective lenses (which would not be covered by a health plan.)
And in many cases, dental coverage can be very limited, so the devil is in the details.
That said, having dental or vision coverage before something goes wrong could be the difference between financial security and a huge financial crisis.
Happy Graduation
Graduation marks more than just academic achievement — it’s the gateway to adult life and all the responsibilities that come with it. Understanding insurance now can prevent financial setbacks later. From health to renters, auto, life, and even travel insurance, new grads should approach their insurance choices thought the lens of making informed decisions to set up their lives.
While navigating these options can be complex, the peace of mind they offer is worth the effort.
Michael Giusti is senior writer and analyst for InsuranceQuotes.com
