Spring is a time of year marked by transitions. One particularly noteworthy change is college graduation, an occasion that will be celebrated by an estimated 3 million people this year, according to National Center for Educational Statistics.
Financial advisors, of course, devote considerable time and attention to clients’ efforts to save and invest for the college education of children and grandchildren. But there are some helpful steps advisors can take once college is completed that also will help parents, grandparents and the new graduates themselves as their next stage of life unfolds.
For the kinds of assistance and information that young adults need in the areas of financial planning, budgeting, investing and saving, I defer to financial advisors. But I’d like to identify some possible insurance-related risks that may arise once young adults transition from school to work, and which advisors may wish to discuss with clients.
Advisors need not be insurance specialists themselves to raise these issues, and — as always — should stress that they are not tax, legal or insurance experts. Your value is being able to identify potential issues and refer clients to a knowledgeable insurance specialist or other experts if further information or solutions are needed. That advice alone can be very helpful, and much appreciated.
The following are some issues with property and casualty coverage implications that college graduation may trigger:
• Risks related to living on one’s own. For young people who move to their own apartment or home, renter’s insurance becomes an important consideration. Even though recent graduates tend to have fewer possessions than families with children and homes, for example, young people often have computer and home entertainment equipment, sporting and hobby gear, and even personal items such as jewelry that can be expensive and worth protection.
• Auto insurance questions. Moving out on one’s own may mean buying a car, transferring ownership from parents or updating current coverage to reflect where the car is being kept and how it is used. Asking questions about auto coverage and perhaps reviewing that coverage with a property and casualty specialist can result in better protection and lower risk for the young person and his or her family, as well as possible savings by qualifying for discounts that come when auto coverage is combined with other protection.
• Possible inheritance-related issues. College graduation may trigger the receipt of inheritances for those young people fortunate enough to be the beneficiaries of trusts. There are many challenges young adults face when dealing with a sudden influx of wealth, and financial advisors certainly are well-prepared to help with the investment and financial planning aspects of such events.
Because inheriting wealth may be followed by purchases of expensive items such as homes, cars and furniture, for example, an evaluation of property and casualty insurance needs with an expert can be timely, as higher liability limits and additional coverage may be needed.
• Changes in coverage for the graduate’s parents. With a child having finished college and perhaps living on his or her own, parents of recent graduates should review their own property and casualty coverage to better understand their own changing risk profile, especially as they head towards retirement. Such changes could have property and casualty insurance implications that affect coverage and claims payments. Again, suggesting a review with insurance and estate planning experts can head off many potential problems for your clients.
If you’ve helped clients prepare for their children’s college years, perhaps a review touching on these elements can be framed as a kind of advisory graduation present.
Fran O’Brien is division president, North America Personal Risk Services, Chubb. She can be reached at [email protected].