Insurance is one part of your finances that you probably hate, but it is an area you cannot overlook. Mitigating risk is such an important part of your financial plan. In this blog post we are going to dive into the main types of insurance you need.
1. Car Insurance
If you own a car, your state most likely requires that you have car insurance. Here are the parts of your policy you need to be aware of:
- Liability – This protects other drivers if you get in an accident that damages their car and leads to any health care costs.
- Collision – This protects your car if you get in a wreck.
- Comprehensive – This helps protect your car incase it is damaged from weather, theft, or anything else not from the road.
- Optional: You could get a medical coverage supplement that is on top of your own health insurance to help cover you after an accident if the other driver lacks enough insurance.
2. Disability Insurance (DI)
This is probably the most overlooked insurance in my opinion. Very few people outside of doctors, dentists, etc. think they need disability insurance, but this is not true. Socialsecurity.gov states “The sobering fact for 20-year-olds is that more than 1-in-4 of them becomes disabled before reaching retirement age.” This risk is very serious, and if you are disabled and lack this coverage you will not have any income. And your income is one of your greatest assets as a millennial.
Check and see if you have short term and or long term offered through work as it much cheaper. If not, you will have to go get your own policy outside of work. And you may even need to get more if you work only covers 50-60% of your income.
One thing to consider is getting own occupation DI. This is a policy that covers individuals who become disabled and are unable to perform the majority of the duties at their job that they have been trained to do. This is important because your work policies may only pay you if you can’t do any job vs the job you are trained for.
3. Life Insurance
If you are responsible for anyone you need life insurance. To learn more about life insurance, check out this post.
Life insurance is definitely not fun to think about as it relates to your death, but it is so important to take care of your family. There are many types of life insurance, but more than likely term life insurance is your best option. Permanent life insurance is another option but it is costly and not a good investment for most. Plus, I like to keep investments and insurance separate.
4. Health Insurance
Pretty much everyone knows the importance of health insurance so I won’t go into too much detail besides what you will pay as people get this confused.
- Premiums – These are the payments you make to keep yourself covered
- Copayments – This is what you will pay out of pocket when you visit a doctor or what you will pay for a prescription
- Deductible – The amount you have to spend before your policy starts paying for you
More often than not, the more you pay in premiums the less your deductible is.
Also, you will most likely want to get vision and dental insurance as well. It may be less important as there are less unexpected expenses here, but accidents do still happen.
5. Homeowners Insurance
Homeowners insurance is something you definitely need with your home being your biggest investment. This is what you get with homeowners insurance:
- Coverage to repair or replace your house
- Coverage for anything that is stolen or damaged
6. Renters Insurance
Your landlord will have coverage for the structure of the building, but you need your own coverage just in case your belongings are damaged from a natural disaster, theft, or fire.
7. Umbrella Insurance
Umbrella insurance got its name because it basically acts as an umbrella over you to cover claims that go beyond your existing policies. This one is ofter overlooked, but can be so important when things go very wrong. You never know what could happen if you have a pool, kids, etc.
8. Pet Insurance
Everyone that owns pets can tell you that they end up being very expensive. Pet insurance helps reimburse you for costs that comes from checkups, vaccines, surgeries, etc. There are three different types:
- Accident Care – This helps cover treatment after an accident
- Wellness – Helps cover regular checkups, vaccines, and screenings.
- Comprehensive – Helps with both regular visits and unexpected accidents
Most of the time you can plan ahead for the wellness checks so you might not need insurance for that. However, you never know what unexpected accidents may occur which is why getting accident care may be in your best interest.
This should help give you a basic understanding of the necessary insurances you will need as a millennial!
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Disclaimer: none of this is advice, it is just for informational purposes. Talk with your financial planner before implementing any of these strategies.