All Things Insurance In Your 20's

The term "Adulting" is commonly used to describe characteristics or behaviors that align with those of a responsible adult. In the years when a child goes from high school to college to career, many of these "adulting" events occur. And what could be more adult than making sure you have adequate insurance coverage!? Below are considerations for the young adult as they grow through this next stage of life: 

1. Health Insurance: Despite not being a federal requirement since 2019, health insurance is the most important type of coverage an individual can have. Those under age 26 can choose to remain on a parent's policy until December 31st of the year they turn 26 for parents on an ACA plan, or until the end of the month in which they turn 26 for employer provided plans. For those attending college, there may be student health plans available as an affordable alternative, but each school differs. Do research and check each school's options. For those out of college starting careers, most employers will offer a short list of plan options. A healthy young adult can choose higher deductible options saving on monthly premium costs. Lastly, those aged 26+ not in school and do not have employer health insurance benefits available can go to the public marketplace at HealthCare.gov to find a plan.
   
   
2. Life Insurance: Life Insurance may sound like a good idea when a friend of a friend interning at an insurance company explains the benefits; however, it may not be necessary for unmarried young adults without dependents. Once married, consider income needs if either spouse faced premature death, like paying off a mortgage so the surviving spouse can afford to stay in the home. Similarly, once children arrive, it's time to determine the amount needed to provide a financially stable environment in case of premature death. Once the life insurance amount is determined, we recommend obtaining a 20- or 30-year term policy, depending on an individual’s situation. By the time the policy term ends, the children will be grown, retirement savings built up, and the means to provide for self and family is well established should an unexpected accident occur. Permanent insurance, such as whole life or variable universal life, is very expensive. Term insurance is a lower cost option to protect an individual and their family. Your Financial Planner can discuss individual circumstances to determine what is the best course of action.  
   
   
3. Disability Insurance: According to the Social Security Administration, one in four 20-year-olds will become disabled before reaching retirement. This illustrates the need for disability insurance coverage as more significant than realized. Many employers offer short-term and long-term disability coverage as an employee benefit. However, it is essential to ensure lasting long-term coverage in case you become disabled between jobs or with an employer with low or no coverage, still accessing income replacement dollars within this gap. For healthy young adults, these policies can be relatively inexpensive.
   
   
4. Renters Insurance: Many young adults are not in a financial position to buy a house, so renting is the primary choice. Some landlords will require tenants to have renters’ insurance, but others will not. Even when not required, we recommend obtaining coverage to protect against fire, natural disaster, theft, or more that can damage your personal property, so replacing those items will not  become an unexpected out of pocket expense.
   
   
5. Auto Insurance: Although auto insurance is a legal requirement, a few things are worth noting. Having the bare minimum legal requirement is often insufficient to protect against financial upset if an accident occurs. Speak with your insurance provider about holding coverage above the minimum. To save money on the monthly premiums, choose a higher deductible but keep a healthy and accessible emergency fund so the deductible can easily be met if the accident occurs. Lastly, update insurance providers with accurate annual mileage numbers by sending a speedometer update each year, paying only what is needed. 

Determining proper insurance for someone launching into adulthood is not the most thrilling activity but a necessary one. Beginning the next phase with a safe and secure foundation is critical as life’s complexities continually build. If you have any questions or want to discuss personalized circumstances, please reach out to your Apella advisor or call us at 860-785-2260. 

Sources: 

Health Care Coverage Options for Young Adults | HealthCare.gov 

Health Insurance at Age 26: Leaving Your Parent's Plan - ValuePenguin 

Facts | The Faces and Facts of Disability | SSA 

Disclosure:   

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