While there is a shared belief that insurance is of little relevance until say you are 40 years old and own a house, insurance is highly important when it comes to becoming a young adult as you enter your early 20s due to the various key life events that make insurance necessary such as starting a career, buying your first car, or renting your first ever apartment. There are various misconceptions regarding insurance that young adults have from it being too expensive to not feeling a need to purchase it because they are “young and healthy”. This lack of awareness can lead to young adults being unprepared when the unexpected occurs.
In this blog, we are going to dive into the types of insurance relevant to young adults as well as essential coverages, common mistakes, smart saving tips, and more.
Auto Insurance 101
While auto insurance is absolutely mandatory in order to operate any motor vehicle, understanding the different types of coverage, such as liability, collision, and comprehensive, can make a big difference in how well you’re protected on the road. The cost of your auto insurance premium is all dependent on factors like your driving history, age, the kind of vehicle you are operating, and even your credit score. Having the right auto insurance ensures that you’re financially protected in any case of an accident or collision no matter the circumstances.
Renter’s Insurance 101
A common misconception regarding renter’s insurance is that your landlord’s insurance covers all of your personal belongings when renting a property, which is not the case. Renter’s insurance is designed to protect your property and provide personal liability coverage in the case that someone or something is injured in your apartment. While no state requires renters insurance, landlords have the power to make it a requirement within the leasing agreement and often times do. Fortunately, renter’s insurance is pretty affordable, ranging from roughly $15 a month depending on various factors, and is a much better option than having to potentially pay thousands in unexpected damages.
Insurance Challenges Faced by Young Adults
Budgeting for Insurance
Fitting insurance into a tight budget can be a challenge, but it’s important to prioritize the most essential coverages. Opting for minimum coverage in some areas, like auto insurance, and investing more in others, like health insurance, can be a smart approach when funds are limited, but taking into account where you personally may need more or less coverage should come first when deciding what works best for your situation.
The Online Insurance Market
With there now being a multitude of apps and sites for purchasing insurance, it is very easy to take advantage of the convenience of it all without giving much thought to what coverage and policies would suit you and your lifestyle best. While there are benefits to the digital world of insurance, it is still important to ensure that you’re doing extensive research and comparing options online, as well as speaking directly to an independent agent, who can help you avoid potential gaps in coverage that could leave you unprepared and paying more than you can afford.
Switching from Parental Coverage
A significant challenge for many young adults is transitioning off of their parents’ insurance plans. Whether it’s health, auto, or renter’s insurance, buying your own coverage for the first time is a big step, but can be made easy with the help of an independent agent. Understanding what to look for and how to navigate the process is key to making this transition smooth.
Common Mistakes Young Adults Make with Insurance
One of the biggest mistakes young adults make is underestimating the importance of insurance due to youth and good health. Choosing the cheapest policy without fully understanding the coverage gaps can leave you exposed to unnecessary risks. Additionally, failing to update your insurance when your life circumstances change—such as moving, getting a new job, or upgrading your vehicle—can result in inadequate protection. Although easy to forget to occasionally shop around for better rates and coverage, doing so can end up saving you money in the long run.
How to Save Money on Insurance
Discounts Available to Young Adults
There are various discounts that young adults can take advantage of, such as good student discounts for auto insurance or group health insurance rates through student organizations or alumni groups. These discounts can make a big difference in the cost of premiums.
Bundling Insurance Policies
Many insurance providers offer discounts for bundling policies, such as combining auto and renter’s insurance. Bundling can help simplify your coverage and reduce your overall costs.
Increasing Deductibles
Although increasing your deductible is one way to lower your overall premium costs, this strategy should be considered with cation, as it means you’ll pay more out of pocket in a circumstance when you need to file a claim. For young adults who have a good driving record, this trade-off might make sense as a way to reduce monthly expenses and aid in budgeting overall.
Future Insurance Needs
As your life evolves, so do your insurance needs. Major milestones such as getting married, buying a home, or having children can significantly change the type and amount of coverage you need. Building a solid financial plan that includes the right insurance policies is essential for long-term financial health. Having an emergency fund in place, alongside proper insurance coverage, ensures you’re prepared for unexpected events while also securing and protecting your future.
It’s clear that insurance is more than just a box to check—it’s an essential part of becoming a financially responsible adult. By understanding your coverage options, avoiding common mistakes, and taking advantage of available savings, you can make sure you’re protected in the areas that matter most.