Everyone has insurance issues, even when you’re young and just starting out. Your parents and others mean well in giving you advice, but unless they’re in your same life stage, it’s hard for them to understand.
Understanding insurance doesn’t have to be rocket science. With a little help, you can understand and make smart choices. In fact, we have lots of ways to increase your insurance IQ. Start by taking our 10-question online quiz. Then browse the information below that applies to you.
Select from the Following:
Auto Insurance Considerations for Young Singles
- As long as you live with your parents and don’t own your own vehicle, you are eligible to remain on your parents’ auto policy. Staying on their policy saves money because parents are considered lower-risk drivers than young singles. However, many people buy their first car as a young single. If you do, insurance companies will require you to purchase your own insurance policy to avoid any potential legal confusion about who owns the vehicle and is responsible for its use.
- In most states the law requires you to maintain auto liability insurance to cover losses that are caused by your negligence, and sometimes you are required to carry personal injury protection coverage. To avoid penalty, pay your premiums on time, and don’t let your coverage lapse to save money in the short-term. If you do, you may be putting yourself at substantial financial risk as well as negatively affecting your insurance history.
There are several ways that you can prudently control your costs for auto insurance:
- When buying or leasing your first car, remember to consider the cost of insurance in your financial calculations. Insurance rates vary with the type and model of vehicle, so check out these costs before you decide which car to purchase. For example, SUVs, convertibles and performance vehicles typically cost more to insure than other cars.
- While auto policies are an important way to protect your financial health, younger drivers usually own fewer assets and require less liability coverage. However, an accident claim can take a long time to settle, while assets may continue to increase. In such a case, your assets could outgrow your coverage even after an accident has occurred. Consider assets that you may accumulate in the next year or two, when determining your liability limits.
- To control costs, parents should also ask about an “accident forgiveness” clause that promises not to raise premiums if a student gets into one minor accident. They should also consider raising the policy’s deductible and only allowing their child to drive the family’s oldest, least expensive car. In addition, parents might consider purchasing an older car for their child and foregoing comprehensive and collision insurance on that vehicle.
- If you purchase a used car, or your parents give you their old car, you might consider dropping the collision coverage as a way to cut expenses. With older cars, the cost of collision coverage can exceed the value of the car.
- You might also consider raising the deductible for your comprehensive and collision coverage. A higher deductible will lower your premium cost.
- Seriously think about commuting to your job via public transportation, rather than by driving. Your premiums may be lower if you limit your vehicle use to weekly recreational activities.
- If you will be traveling extensively or will be deployed in the military for an extended period of time – and no one will be driving your vehicle – you may be able to suspend some or all of your coverage to save on premium payments. You should check out and choose a policy that specifically allows for full or partial suspension.
- Taking a defensive driving course may help lower your premiums.
- And, of course, it’s wise to maintain a good driving record – one devoid of tickets, accidents, and Driving While Intoxicated citations.
- For those of you in school, it’s also advantageous to maintain good grades, and inform your insurance company every semester, as they often offer preferred rates and discounts to young people who do so.
- College Students and Auto Insurance: Parents and college students should do some homework regarding auto insurance. If a college student is going to be using the family vehicle when visiting home, parents should make sure the child is listed by name on the family’s auto insurance policy. If the student will be taking a car with them to school, parents should check the specific rates for the college’s city and state before deciding whether to keep their child on the family’s auto policy. In addition, the insurance company should be notified each semester if the student maintains good grades, as that accomplishment might lower premiums.
Home Insurance Considerations for Young Singles
- At this stage of your life, you’re more likely to be a renter. So you should seriously consider renter’s insurance. However, make sure you understand what’s covered and what’s not covered by your policy. Don’t rely on the landlord’s insurance, or your parents insurance. As someone living independently, you need to protect yourself and your belongings.
- In maintaining your own residence, you must realize that you are liable for things that happen on your premises. For example, you might be using your apartment for parties. Keep in mind that in many states, you could be held legally responsible for the actions of anyone who drinks in your home and then has an accident in your house or after leaving it. Your homeowners or renter’s policy should protect you against lawsuits due to these types of liability issues.
- You might be sharing your apartment with roommates who are unrelated to you. In such a case, insurance coverage can become complicated because renter’s insurance is designed for single individuals and traditional families. Be sure that you have an individual policy of your own to cover you and your possessions.
- If you are in the military, speak with your insurance agent about whether personal items that you take with you during your deployment will be covered if they are lost, stolen or damaged. Homeowner’s insurance typically covers personal property that you take with you while traveling, but most policies exclude coverage for damage caused directly or indirectly by war. In addition, most homeowners policies require you to occupy the residence insured. If you are deployed, call your insurance carrier and state insurance department to discuss any possible coverage issues.
At this stage of your life, you are no doubt mindful of your expense budget. Some prudent steps can help you control your home insurance costs, as well as lessen the likelihood of damages occurring in the first place.
- Investing in a few smoke detectors and fire extinguishers, and strategically placing them around your home – particularly in the kitchen and bedrooms – is a smart practice that can pay off big time. Not just in lower insurance premiums, but in providing real life-saving protection to you and everyone else you invite into your home.
College Students and Renter’s Insurance: Whether students live in college housing or rent apartments, they will likely have valuables — such as a computer, TV, stereo and/or video game system — that could be stolen or destroyed in a fire or natural disaster. Parents should check their homeowners policy to see whether it will cover a college student’s possessions. Furthermore, if students live in an off-campus apartment, parents should consider purchasing renter’s insurance through their existing homeowners insurance provider.
Health Insurance Considerations for Young Singles
As health insurance in the U.S. is typically employer-provided, getting a job is often the first time a young person begins to think about this matter.
While you are young and healthy, you might actually feel that you don’t need health insurance. In fact, you might be tempted to do without coverage because you are strapped for cash and want to avoid paying the premiums. The National Association of Insurance Commissioners recently surveyed U.S. consumers and nearly a fifth of young singles indicated they would decline employer health insurance to save money.
However, forgoing health insurance is a dangerous decision. Accidents and unforeseen illnesses can be financially devastating for you and your family. Weigh carefully the repercussions of not being covered, and seriously consider buying health insurance suited to your needs.
- Know your family’s health history. If you are at high risk for developing a medical condition – such as diabetes – later in life, think carefully before saying no to your employers’ health policy, even if it means paying higher premiums while you are young and healthy.
- Understand that if you have been covered under your parents’ health insurance policy while you were in college or by a plan offered through your college, often this coverage ceases when you graduate. Additionally, many companies have employee probation periods before health coverage goes into effect. For these periods of no coverage, you should check to see whether you can extend your parents’ coverage short-term under COBRA. Some colleges also offer graduates interim coverage. As an alternative, talk to an insurance agent about purchasing catastrophic health coverage as a short-term measure.
- As you sort through job prospects, don’t make the salary your sole priority. Health coverage is perhaps the most important job-related benefit you can receive; so study the health plans that prospective employers provide. Many companies have coverage through an HMO or a managed-care plan, which means that many decisions – including which physicians are included in the network – are made by the healthcare provider. Others have more flexible plans that allow their participants to choose their physicians. In either case, the employee is responsible for co-payments which help keep costs under control.
Here are some ways that you can control your health insurance costs or cover an interim period before or between jobs when you are not under an employer’s plan.
- If you feel you can’t afford regular health insurance, a more affordable option you may want to consider is purchasing a high-deductible major medical policy that only covers very serious or catastrophic health costs. It will offer lower premiums than regular health insurance policies and help you cover bills for “major” medical events, like surgery, hospitalization or emergency room care. But it will typically not cover routine doctor visits or check-ups.
- If you are convinced that you are generally healthy and have a healthy lifestyle and definitely do not want to pay (or can’t afford to pay) high insurance premiums, consider a Health Savings Account. HSAs can be set up individually or, increasingly, as an option through employers. They allow you to accumulate and spend pre-tax money for health expenses via an account that you own and can take with you should you change jobs.
- If you are in a physically demanding job, you might want to consider purchasing disability insurance, as research shows that young people are four times more likely to be disabled than die at an early age. As an option, many employers offer disability coverage, which provides lost income in the event that you are injured and unable to work. If the injury is work-related, then workers' compensation coverage applies. If you decide to purchase disability insurance, try to get a non-cancelable, guaranteed renewable policy. That means it can never be canceled and it's good until age 65. Make sure you review your disability policy on an annual basis to ensure any disability payments continue to keep pace with your increase in earnings.
Disability Insurance Considerations for Young Singles
When you’re young, one of the last things on your mind is thinking about becoming disabled. However, statistics from the U.S. Census Bureau indicate that in 2000 a substantial portion of the nation’s population — nearly 20 percent — had some type of long-lasting condition or disability.
If you are hurt in an accident or become seriously ill and you can’t work for several months or longer, your bills will still keep coming in. Long -term disability insurance coverage can protect a portion of your income if something happens to you.
- Even if you are single and have no dependents yet, you probably have a family who would be affected if you became disabled. Family members might not be prepared financially to take care of you. You may want to plan ahead by looking into long -term disability coverage so you have enough resources to take care of yourself.
- Your chances of being approved for disability coverage while you’re young and healthy are better than later in life. In addition, younger, healthier individuals typically pay lower disability premiums.
Life Insurance Considerations for Young Singles
There are differing opinions about the importance of purchasing life insurance as a young single since you are unlikely to support individuals whose livelihood is dependent upon your income. While buying a policy early in your life will provide you with better deals and potentially guarantee your insurability, some experts doubt that individuals need life insurance at a young age when they typically don’t have dependents.
As a young single, you should consider your options and make a choice based on your finances, health and other circumstances. It always makes sense to start thinking about life insurance early-on so that you can make the most educated decision.
- When choosing a life insurance product, permanent and term policies are the two major options. If you are a young professional, earning a good salary, able to afford higher premiums and looking for a savings component, you might want to invest in permanent insurance, such as a whole life policy, which builds cash value and also pays a death benefit.
- On the other hand, a term life policy, which offers death benefit protection for a specified time period, is a less expensive option for young people who are still working out their finances and just want to leave something for their loved ones in the event of their death. Term life is typically less expensive in your younger years than permanent life insurance, which covers you for your entire life and typically has level premiums.
- If you can’t afford whole life insurance right now, but think you may want it in the future, you may want to consider term life insurance with a conversion option that will let you change to a whole life policy for a fee when you are ready.
- If you are in the military, consider Serviceman’s Group Life Insurance (SGLI) - a program of low-cost group term life insurance automatically available to all military members. This policy is automatically activated unless the service member opts out. If you have decided to purchase additional life insurance outside of the SGLI, review the list of exclusions to the policies, and make sure that the benefits will be payable even if the death is a result of war, the action of a military force or traveling on a non-commercial aircraft.
- Individuals who sell life insurance at military installations are required to obtain authorization from the Department of Defense, so ask to see the agent’s permit or license.
The cost of life insurance is affected by multiple factors that you should understand. However, some are not easily in your control, such as pre-existing or chronic health problems like diabetes, heart disease or cancer.
But others are more behavioral in nature and, therefore, within your power, such as…
- Poor health habits such as smoking and excessive drinking.
- Your driving record, in terms of accidents, Driving While Intoxicated citations, tickets and claims. The better your driving record, the better the rates you’ll receive for your life insurance.
- Engaging in dangerous hobbies, such as skydiving or rock climbing
Insurance is about assessing risk. If you participate in high-risk activities or exhibit high-risk behaviors, insurers will treat you as a high-risk customer. They may charge you higher premiums or deny you coverage.
Auto Insurance Considerations for Single Parents
- Carefully review your auto insurance needs with your insurance agent to ensure that you are obtaining the coverage you need in the most cost-effective way.
- If you are going through a divorce, alert your insurance company to the change and provide the necessary paperwork to show that you are the owner and insured party on your auto policy when the divorce is final. At the same time, remove your ex-spouse from the policy, if appropriate. Should he/she get into an accident, you could potentially be liable if you still share the policy. If a claim occurs, your ex-spouse may be listed on any check if they are still listed as an insured. Also, if you move, be sure to change the address listed on the policy.
- As a parent, you may want to increase liability insurance coverage, especially if you will be carpooling children other than your own.
Home Insurance Considerations for Single Parents
- Depending on who is listed as the owner of the home and whether you and/or your ex-spouse are moving following a divorce, you may need to adjust the paperwork associated with your homeowners insurance policy. It should only have the name of the current homeowner listed.
- If you have a mortgage on your home, your insurance policy must list the name and address of the financial institution that currently holds your mortgage account. Be sure to update the information on the deed, mortgage and homeowners policy if ownership changes in the divorce.
- If you change the locks on your house or install a new security system to your home following a divorce, make sure to alert the insurance company, as you may be eligible for a discount on your premiums for the upgrade.
- Should you or your ex-spouse move to a rental property following the divorce, consider purchasing renter’s insurance to protect your personal items as well as to provide you with liability coverage.
Health Insurance Considerations for Single Parents
- If you and your children are dependents on your spouse's employer group coverage, and you get divorced or legally separated, you must contact the employer if you wish to continue your health coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA). The employer will not notify you that you have been removed from the plan.
- After a divorce, coordination of benefits for your children can become quite complicated. If the divorce decree names one parent responsible for the children's health coverage, that parent's coverage will be primary, meaning that benefits will be processed under that policy prior to the other parent’s policy.
- If you have an individual policy, check with your insurer to add your children to your policy.
- Be sure to check with your agent to make sure your coverage is not duplicated by a former spouse, if applicable.
Life Insurance Considerations for Single Parents
- If you and your ex-spouse have life insurance policies, make sure to adjust the beneficiaries on the policies to reflect the changes you both want after the divorce is final.
- If you become a single parent, review your life insurance policy, will and retirement accounts to make sure they all indicate the correct beneficiaries.
- If your spouse will be paying for child support, consider requiring that he/she purchase a life insurance policy covering the term of the payments. You should be named as the owner and beneficiary of such a policy to prohibit your ex-spouse from changing the beneficiary name without your agreement.
- Never leave a life insurance benefit directly to a minor child; instead make sure the policy names a contingent beneficiary or a trustee who will act as a beneficiary on behalf of the child. The best way to avoid having the life insurance benefit taxed is for you to own the policy on your ex-spouse and vice versa.
- When considering purchasing life insurance, the amount of coverage you need depends on your financial circumstances and beneficiaries. Do your homework and make sure that the company is reputable, the amount of coverage is adequate, and the policy is affordable and works for you. Children of single or divorced parents may be more financially vulnerable in the event of the death of a parent. The main guardian should carefully choose the level of life insurance to provide the best safety net for the children.