Raise your hand if you have insurance. That’s probably most of you. But did you know that you may need different types of insurance, and definitely different amounts of coverage, for each stage of your life? Here’s a breakdown to give you some direction as you make insurance decisions to protect yourself from the risk and uncertainty that is simply part of life.
Many students are still eligible for health and auto insurance through their parents’ plans. They don’t typically have dependents or property. This may lead you to think that students don’t need to be part of the insurance conversation, but there is one type of policy that could make a difference to your finances: a hospitalization policy. Hospitalization policies cover unexpected medical costs students accrue from surgery or hospitalization, essentially shielding them and their parents from going into debt to pay for medical expenses.
Young, Single, Working, And On Your Own
The most important types of insurance that those in this stage of life should consider include health, renters, auto, and disability insurance. Most likely your employer will provide health insurance for you, but if they don’t, it is important to research your options to find the best rates available. Renters insurance is very affordable and often required by landlords. It will help protect you in the case of stolen or destroyed property (think jewelry, laptops, or other big-ticket items). And when it comes to auto insurance, it is important to shop around and find the most competitive coverage.
Finally, for this stage of life, disability (or critical illness or income replacement) insurance should be considered. This type of insurance pays a portion of lost wages if you are unable to continue your job due to an accident or illness. Because there are limits and gaps in coverage from your employer, state, and workers’ compensation, it is vital that you also have your own disability policy.
Newly Married Homeowners
As a newly married couple with a house, it’s time to turn your attention to life, homeowners, and liability insurance. The last thing you want to do is get married, buy a new home with your spouse, and unexpectedly pass away. In this extreme case, you would be leaving your spouse responsible for paying off the entire mortgage with one income. If you have life insurance for yourself, you would alleviate such a risk.
Speaking of your home, homeowner insurance policies vary in what they cover, so it is important to make sure you understand the terms. Weigh the pros and cons of purchasing a more expensive policy that will pay for the full cost of rebuilding your home and for replacing your possessions versus a policy that just pays for your home’s market value. (1)
Finally, you should also consider liability insurance, also known as umbrella coverage, which essentially will protect you beyond the protection of homeowners and auto insurance. Because your net worth is growing, this type of insurance is important.
The most important types of insurance to have at this stage include life insurance and health insurance for your children, as well as disability insurance. On your existing medical policy, it is important to claim a life event when you are pregnant or within a month of your child’s birth. This will allow you to add your baby to your medical policy.
If you don’t already have a life insurance policy, now is the time to get one. If you do have a policy, be sure to boost your coverage to include the future cost of raising a child, college costs, and maybe even coverage for a stay-at-home parent. Either way, make sure that your children and spouse are taken care of should anything happen to you.
Another type of policy to revisit is disability insurance. Now that you are providing for children, possibly paying off a mortgage, and reworking your budget to include childcare or a reduced income for a stay-at-home parent, your income needs to be guaranteed. Make sure that you cover the risk of not being able to work due to an injury, accident, or unforeseen complication.
Empty Nesters And Pre-Retirees
This is a pivotal life stage where making decisions for the future comes into play. You may still need many of the above-mentioned policies, but you should also look into long-term care insurance. This type of insurance covers the future costs of long-term care, which may include in-home care or the costs of living at a nursing home to assist with the basic personal tasks of everyday life. There could come a time when you cannot take care of yourself independently, and you don’t want to drain your savings to get the care you need. There are different types of policies, including traditional LTC policies or hybrid LTC policies, so do the research to find the best choice for your situation.
Once you retire, your insurance priorities change. For the most part, you will not need to protect your ability to earn income since you are no longer working. However, as you get older, insurance can significantly lessen the impact of medical expenses and long-term care costs.
When you officially retire and lose your employee healthcare coverage, you will either have to reassess or obtain new coverage on the following: health insurance, Medigap, Medicare prescription drug plans, and long-term care insurance. If you retire early, you may need an additional short-term health insurance policy since Medicare does not kick in until you reach age 65. It is also important to consider Medigap policies since Medicare will most likely not cover all of your medical expense needs. Also, because Medicare Part A and Part B do not cover most prescription drugs, you will need to shop around for Medicare Prescription Drug Plans (Part D). Finally, as discussed in an earlier stage, it is very important to make sure you have LTC insurance. The longer you wait, the more expensive this type of coverage will be.
And remember to take the time to review all of your in-force policies to make sure you aren’t over-insured, and update beneficiaries of your life insurance policy as needed.
What Stage Can We Help You With?
With different stages of life come very different insurance needs. The 1on1 Financial team would love to help you determine what insurance policies and coverage would benefit you in your unique circumstances and stage of life. To learn more about what we do or to request a complimentary consultation, call our office today at 909-981-1720 or simply click here to schedule a free 15-minute introductory phone call!
About 1on1 Financial
1on1 Financial is an independent financial advisory firm specializing in guiding working and retired professionals, executives, and business owners along the path to financial well-being. Founded in 1997, we use a team approach to help our clients accumulate wealth, generate income, preserve their life savings, and strategically plan for the distribution of their estate. With more than 50 years of combined experience in the financial services industry, we remain true to our fundamental mission: to provide personalized guidance, treatment, care, and service so our clients can gain control of their future and feel confident in their financial life.