I believe in having a backup plan and protecting my finances, which is why I acquire as much insurance as I can afford. But after a recent discussion with some young adults in their early 20s, it seems that some young people don’t grasp the importance of certain insurance policies or they skip getting insurance because their income doesn’t allow for any extra expenses. I completely stand behind the idea of not taking on more than we can afford — but at the end of the day, insurance is for a protection.
Even if you can’t afford the Cadillac of an insurance policy, some protection is better than none. Insurance isn’t only for older individuals. No matter your age, here are five insurance policies you can’t afford to be without.
See also: How to Claim Your Medical Insurance
1. Renter's Insurance
These policies are super cheap and you can usually get one for under $20 a month. Some apartment complexes or landlords require each tenant to have a renter’s insurance policy of at least $50,000 – $100,000. This policy protects your possessions in the event of a fire or theft. What some young adults fail to realize is that their landlord’s property insurance only covers the actual property, not the contents inside.
2. Health Insurance
If you’re a college student, you might be covered under your parent’s health insurance plan. But after graduation, you’re on your own. If you’re fortunate enough, your employer might offer group coverage and cover the cost of your health insurance or a percentage of this cost. This reduces your out-of-pocket expense. But if health insurance isn’t offered by your employer, you can reason that you don’t need health insurance at present. Maybe you’re in good health and never go to a doctor. But just because you’re in good health today doesn’t mean you’ll be in good health next month or next year. You might not be able to afford the best health insurance plan, but you need some type of coverage in case of an illness or accident.
3. Life Insurance
Thinking back to my early 20s, I wasn’t thinking about life insurance. Other young adults might feel the same. However, death can happen to anyone at any age, and without a life insurance policy, your family will have to pay for your funeral and burial out-of-pocket.
Many people get life insurance to provide their family with financial support. But just because you don’t have a spouse or children doesn’t mean you don’t need a policy. A life insurance policy can also pay off any outstanding debts you might have. If you’re young and relatively healthy, you can find a cheap 10-, 20- or 30-year term life policy.
4. Disability Insurance
Some employers don’t offer short-term disability insurance, but you can find a policy on the individual market. If you’re unable to work temporarily due to an illness, injury or accident, you’re not likely to receive financial assistance from the state. Short-term disability insurance can provide income while you’re recovering. But given how disability compensation is usually only a percentage of regular earnings, you’ll still need an emergency savings account to help cover your expenses.
5. Payment Protection Insurance
If you have a credit card, an auto loan or a mortgage loan, your bank may offer payment protection, which is an insurance policy that covers your minimum payments if you’re temporarily out of work due to an illness or a job loss. Premiums are based on the amount you owe, and paid each month with your regular payments. Some people decline payment protection insurance because it increases their monthly payments, but it’s a small price to pay for peace of mind. With your minimum payments covered, you don’t have to stress over defaulting on bills or damaging your credit score.
You can buy insurance for just about anything. And while some insurance policies may seem like an unnecessary monthly cost, the benefits you receive are well worth the monthly premium. And since insurance policies are customizable, it’s not too difficult to find one that fits in your budget.
What other insurances can protect our finances?