Key Points:
- Insurance is often overlooked in your twenties but is essential for financial planning and risk management.
- Different types of insurance like life, health, and vehicle insurance serve specific needs and can be more affordable when started young.
- Consulting an insurance advisor can help you tailor your insurance needs to your current life situation and future goals.
Being in your twenties is an exciting time to be. You have your whole life ahead of you, filled with immense promise and potential. You could be a recent graduate starting on a professional career path, an aspiring entrepreneur, even ready to start off your family if you have met that someone special you are ready to settle down with.
Risks, injuries, accidents and other unfortunate events may not have even crossed your mind at this stage in life. Neither would you have considered insuring yourself against any financial setbacks caused by them. However it is pertinent to know of the most basic of insurances you should consider as soon as you have the means to pay for premiums on a regular basis.
Another thing to bear in mind is that while some insurance will have a low premium, since you would qualify as a ‘low risk' for instance, in life insurance, you may have to pay more premiums in another category.
Basic Insurances
Some of the most basic insurances that you may want to consider in your twenties include a mix of optional and mandated by law:
- Life Insurance
- Health Insurance
- Critical Illness and Disability Insurance
- Motor Vehicle Insurance
- Home Insurance
Optional Insurances to consider in your twenties:
Life Insurance
Twenties is hardly the time when you get thinking about death, death is however, the only certain thing in life. At the risk of sounding morbid, getting a life insurance in your twenties is going to be easier on wallet since premiums tend to ring higher with age.
If you are considering marriage and starting a family, looking around for a good life insurance makes sense, since you would be safeguarding the future of your dependents, spouse and kids.
While permanent insurance has its appeal in having actual cash value, its premium is higher as compared to term life insurance policies. It has life as well as death benefits.
You may think of term insurance as one that would be of use to your nominated beneficiaries of the policy only in case on your death, but it is a lighter expense as compared to permanent life insurance, in terms of premium costs. One good thing about term insurance is that you can start out by getting a 10 years term insurance policy and extend it for another term as you age. Your premium rates would be revised at this time, according to your age, physical and medical circumstances. It is however worth a thought, to start out with and have peace of mind that your loved ones would be taken care of even after you are gone.
Health Insurance
Inflation and cost of living spiraling upwards means that most young people do not even consider getting health insurance coverage. This may seem like a saving to you for the moment but in case of a misfortune, medical costs rack up at alarming speed and may leave you financially crippled for life.
The good news is that young people, with no obvious medical problems in their family history can shop around and get insurance quotes for competitive health insurance coverage.
Additionally, you can cut down on premium costs by increasing your deductible amount. It would mean that the insurance agency would pay for your medical expenses should you get in an accident and require extensive treatment only after you have borne the initial costs yourself first.
For instance, if your health coverage was for 50,000 USD, with a deductible for 30,000, and your medical bill came up to 35,000, you will be responsible for paying 30,000 USD while the insurance company will chip in the rest. The appeal of this type of insurance is that you can afford some coverage while saving on premiums every month.
Critical Illness and Disability Insurance
Sometimes part of life insurance itself, critical illness and disability insurance comes in handy if you are diagnosed with a disease or are disabled and thus unable to work. Again, preparing for such an eventuality is far from the minds of a twenty something, but it is an area that should be looked into.
This type of insurance enables you to a steady stream of income when you can no longer hold an employment and gives you some semblance of financial independence when you are at your most vulnerable. Unlike life insurance, this one is designed to benefit you, in your lifetime and ease, at least in monetary terms your worries.
Mandatory insurance, applicable irrespective of age
Motor vehicle insurance
Every driver in the US must possess an adequate amount of coverage should he or she get in accident. The minimum is third party liability insurance (read more about motor vehicle or car insurance here).
This is one kind of insurance where young age translates, rightly perhaps, as inexperience and makes it difficult for young drivers to get insurance at a good price.
There are various levels of insurance coverage for young drivers, permanent or temporary. Since a lot of factors are taken into account for this insurance, including your age, driving record, employment status, zip code, make of car, as well as credit score, these can all drive up your insurance premium higher.
However, if you intend to buy and drive your own car, this is one insurance you simply can't overlook. For one thing, it is mandated by law, secondly, chances of getting in a road accident, or a collision are more than getting hit by a bus and being bedridden for the rest of your life. It protects you and your vehicle as well as takes care of any liabilities incurred from damage to property or people caused by you.
There are several levels of insurance coverage offered in this category and a licensed agent would be better equipped to help you what kind would be best for you and your wallet.
Home Insurance
Only applicable if you have been able to purchase your first home, even at such a young age, home insurance is again mandated by law. Since most property purchases are carried out by taking out a mortgage, home insurance protects your property and its contents from damages. (read more about home insurance here)
Homeowner's Policy, as they are commonly known, come in standardized seven categories and offer two types of coverage; property protection and liability protection. (read more about them here)
Twenties is the right time to start mapping out your life, not just in terms of setting your goals and aims, but also to deal with some of life's unexpected turns. The right kind of insurance coverage will take away the edge to this uncertainty.
The best way to decide what insurance you should get is to assess your situation and your expectations in life, sit down with an insurance consultant and figuring out a ‘risk management' strategy that works for you.
