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Important Insurance Tips for Young Adults

By Jeffrey Bangerter

The transition into adulthood brings many exciting milestones. Whether you’re moving out on your own, starting a new career, or even starting a family, you’ll enjoy new freedoms and new responsibilities. As you step out on your own and start to accumulate assets, it’s important to have insurance in place to help protect them.

What types of insurance do you need? And can you really afford it? Here are some important things to consider as you begin this new phase of your life.

5 Important Types of Insurance for Young Adults

There are many different types of insurance coverage available. When you’re first starting, some may be more important than others. Here’s a look at a few types of coverage you’ll want to consider.

1. Auto Insurance

If you drive a vehicle, you’re required to have auto insurance. This means that once you’re no longer on your parent’s policy, you’ll need to purchase your own coverage. Unfortunately, this is a large expense you can't avoid. However, you can cut your costs by shopping around for the best rates.

2. Renter’s Insurance

Have you ever wondered what you would do if your home was hit with a fire or a flood? You might think the items you own aren’t worth much. However, when you consider the cost of replacing your phone, computer, clothing, and more, you’ll see how quickly it can add up. Considering that the average renter’s insurance policy costs less than $200 a year, this is a coverage you can't afford to ignore. 1

3. Heath Insurance

Even if you’re currently very healthy, you never know when you could suffer from a serious accident or illness. One single incident could result in bills that may take you a lifetime to pay. This is why it’s critical for every adult to have some form of health insurance coverage.

4. Disability Insurance

When you’re young, you might not think much about having a serious accident or illness that could leave you disabled. However, according to the Social Security Administration, 25% of 20-year-olds will become disabled for 90 days or more before reaching the age of 67!2 A disability insurance policy will help protect your future earning potential.

5. Life Insurance

If you don’t currently have anyone relying on your income, life insurance may not feel like a high priority for you. However, it’s a good idea to keep the future in mind. When you’re young and healthy, a life insurance policy is as inexpensive as it will ever be. If you’re able to purchase coverage today, your future self will thank you!

Balancing Your Insurance Needs

As a young adult just starting out, balancing your insurance needs and your budget can feel like a major challenge. Take heart in knowing you’re not alone! If you’ve found that you don’t have the cash flow to purchase all of the insurance you need, you can still get some coverage.

Start by looking at your budget to determine how much you can comfortably spend on insurance each month. Then, make a list of all the insurance coverage you think you need, in order of importance.

Start with the coverage you’ve ranked the highest and work with an insurance agent you trust or spend some time shopping around for coverage you can afford. Then, continue moving down the list until you’ve exhausted your monthly insurance budget.

It’s a great idea to review your insurance coverage every couple of years. When you do, if you find that you have more room in your budget, consider protecting yourself even further by adding the next coverage on your list. 

If your circumstances change, for example, if you purchase a home, get married, or have a child, you may find that your order of priority changes as well. By reassessing your situation regularly, you’ll ensure that you’re always covered appropriately.

Start Building Your Financial Future Today!  

As a young adult, the decisions you make today can have a major impact on your financial future. Taking the time to consider the coverage you need and revisiting it regularly will help you build a solid foundation for your future.

Our “Insured at Every Stage: Starting Out” guide takes a deeper dive into important insurance strategies for young adults.

Download your FREE copy today!  


1 https://www.policygenius.com/renters-insurance/learn/how-much-is-renters-insurance/

2 https://www.ramseysolutions.com/insurance/disability-insurance

This is for informational purposes only, does not constitute as individual investment advice, and should not be relied upon as tax or legal advice. Please consult the appropriate professional regarding your individual circumstance. Guarantees are based on the claims-paying ability of the insurance company and assume compliance with the product’s benefit rules, as applicable.

Topics: Financial Planning Financial Advisor Tax Planning Life Insurance 401k Tax Management