4 Types of Insurance to Consider in Your 20s
Shopping for insurance can be overwhelming, confusing, and expensive. It’s easy to file it under “another grown-up thing to handle later.”
The good news is that you don’t need every type of insurance at all points in your life. But having the insurance can mean protecting you and your family from bankruptcy and financial ruin if disaster strikes.
Here are tips for deciding if you need four of the most common types of insurance in your 20s.
Who needs it: Everyone
This is arguably the most important insurance for you to have in your 20s and probably at any stage in life, too. While health insurance is costly in the United States, it doesn’t make sense to skip it unless you absolutely can’t afford it or aren’t able to buy insurance. Not only can treatment be incredibly costly if you’re uninsured, but the lack of proper care means risking serious illness or death.
There are a few different ways to get health insurance coverage. If you’re working, your employer should offer options to you, and potentially with part or all of the cost covered as one of your job benefits.
If you’re unemployed or unable to get coverage from your job, there are still other options.
If you’ve recently left your job or been laid off, you’re typically eligible for COBRA. You’ll have to pay the full premium, which may be high, but you at least won’t have to worry about getting further approval and living without coverage.
You can also purchase a personal high-deductible plan. If you’re healthy, you can pay a low premium, often starting under $100 a month and going up from there, in return for coverage against extreme health problems. These plans might not cover routine visits and prescriptions, but it’s comforting to know that if you end up with a serious illness, you’ll have coverage.
Although health insurance is expensive, needing medical care while uninsured can cost much more. Unfortunately, if you have a preexisting condition, you stand a high chance of being turned down for coverage, so don’t wait until you’re sick to attempt to get insurance.
Who needs it: Almost anyone who rents an apartment
Renters insurance often offers a great value in exchange for the low cost and the ease of obtaining a policy. It’s necessary since any insurance your landlord has likely won’t cover damage or losses to your property.
Premiums often run only a few hundred dollars a year, depending on coverage and where you live, but include enough coverage to replace all your belongings. While people with very little valuable items might not need coverage, the low premiums make it a good value for anyone to guard against loss from fire or theft.
Renters insurance typically comes in two forms – replacement coverage and cash value coverage. Replacement coverage will provide a dollar amount to replace whatever is damaged or lost. For example, if you’re TV is stolen, your policy would pay you enough to buy a new one.
With cash value coverage, you’re only reimbursed for the actual value of the item. Because of this, the small extra cost for replacement coverage is worth it, especially if you don’t have the savings to replace anything you lose.
Who needs it: Anyone that owns a home.
Homeowner’s insurance covers many of the same things as renters insurance does, but may even go a step further. Coverage for liability, theft, and your damage to personal property is still there. But, as the owner of the property, you need coverage to cover repairs if there’s damage to your house.
Make sure that you get proper coverage to insure against anything that could realistically damage your house. This varies geographically, but make sure you’re covered if you’re susceptible to risks like earthquakes or floods.
It’s especially important to make sure you have the right amount of coverage. If you have too little, your policy won’t pay out adequately should you ever need to file a claim. If you’re overinsured, you’ll be paying a higher premium than you need to.
As explained with renters insurance, homeowner’s is also offered as either replacement coverage and cash value coverage.
Who needs it: Primarily, individuals who are married and/or have kids
Life insurance is the one item on the list that really depends on your life situation as to if you need it or not. The general rule of thumb is that if you’re young, single, and have no children, you typically don’t need coverage. The only concern may be to cover funeral costs, but it may just be easier to set aside savings rather than taking out a policy.
If you do have a family, buying life insurance is important to protect your family if you should suddenly pass.
The most common type of this insurance is term life insurance. Like it sounds, this coverage is for a set period of time where the premium reamins unchanged. Depending on your situation, you might want to consider other types, too.
Understanding life insurance, just like all the others, can be complicated. Before purchasing a plan, do your homework and avoid buying more expensive coverage that you don’t need. For more details on life insurance, see this post on an explanation of life insurance options.
One plus to purchasing life insurance when you’re young, it’s typically cheaper.
Before settling on any insurance policy, make sure to get several quotes to ensure you’re getting a good deal. Keep in mind that some companies that offer multiple types of insurance might offer discounts for holding multiple policies.