Insurance When You’re Young and Single
The transition to adulthood is an exciting new stage that marks true independence. You may have graduated from college, taken your first job, even rented your first apartment. With this new freedom comes real responsibilities, including protecting yourself from some of the financial risks that life presents.
Once you are no longer covered on your parents’ policy, you will need to find insurance coverage in your name. It can be expensive for a young driver, so consider shopping around for the best rates, and finding ways to reduce this cost, such as coverage and deductible elections, the type of car you own, and available discounts.
If you are moving into an apartment, you should consider renters insurance. You may not think you’ve accumulated much in value, but when you calculate the cost of replacing your computer, electronic equipment, clothes, and everything else you own, it can total thousands of dollars. Renters insurance is often very affordable. Pro tip: when shopping for a policy, ask about whether it includes liability coverage, which can help protect you in the event you are sued by someone who is injured while in your apartment.[i]
Health care coverage is frequently obtained through your employer. However, if your employer does not offer a health insurance program, you have two choices for obtaining coverage.
The first is to maintain coverage through your parents’ health insurance plan. Federal law permits parents to keep adult children on their plan up to age 26. This choice may be relatively inexpensive, so you may want to ask your parents to inquire what the monthly premium is to add you to their plan.
The second option is to purchase a policy directly, either through a private insurer, the federal health insurance exchange (HealthCare.gov), or through a state exchange, if available in your state of residence.[ii]
Your single most valuable asset is your future earning power. Your ability to work and earn an income is essential when it comes to your financial survival. Incurring a disability, even for a short period of time, can have substantial economic consequences, making disability insurance one of the most important insurance needs at this stage of life.
Since a young, single adult typically does not have other people depending upon their ability to earn a living (such as children or dependent parents), you might think your need for life insurance is minimal.
However, due to a long life expectancy at this young age, life insurance coverage can be very inexpensive. You may want to consider obtaining some coverage to take advantage of low rates and good health in advance of a time when you will have dependents.
Several factors will affect the cost and availability of life insurance, including age, health, and the type and amount of insurance purchased. Life insurance policies have expenses, including mortality and other charges. If a policy is surrendered prematurely, the policyholder also may pay surrender charges and have income tax implications. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments.
Given limited financial resources, extended care insurance may be a low priority. Nevertheless, you may want to have a conversation with your parents about how extended care insurance can protect their financial security (and yours) in retirement.
Talking with a trusted financial professional can help you make the right choices for you, find coverage that meets your needs, keep within the bounds of your current budget.