When we think of insurance, it’s easy to get overwhelmed. With so many different options available, how do you know what coverage you actually need? As millennials, we often feel invincible—but life happens, and preparing for the unexpected is necessary to protect your wealth. Whether you're just starting your career, building a family, or investing in your future, having the right types of insurance in place is the cornerstone of a successful financial plan.
Here’s a breakdown of the essential types of insurance every millennial should consider—and some things to watch out for.
1. Health Insurance: Don't Skip This One
Health insurance is a must. Even if you feel healthy now, unexpected medical expenses can quickly drain your savings. Most of us get health insurance through our jobs, but if you’re freelancing or your employer doesn’t offer great coverage, there are different options through Welcome to the Health Insurance Marketplace® | HealthCare.gov
What to keep in mind:
Deductibles: That cheap plan might come with a high deductible. Make sure you can afford to pay that amount in case something serious happens.
Out-of-Network Costs: Don’t get stuck with a massive bill because your doctor isn’t in the network. Double-check before any appointments.
Preventive Care: Most plans offer free preventive care (like annual checkups and vaccines), so don’t skip these easy wins for your health.
HSA & High Deductible Plan: If you're relatively healthy and don’t visit the doctor often, consider pairing a high-deductible health plan (HDHP) with a Health Savings Account (HSA). You save on premiums, and the HSA offers triple tax benefits: contributions are tax-deductible, grow tax-free, and can be used for qualified medical expenses anytime.
2. Homeowners Insurance: Protecting Your Biggest Asset
If you own a home, you know it's one of your biggest investments. Homeowners insurance protects not only your house but also the stuff inside it, like your furniture, electronics, and more. Plus, it covers liability if someone gets hurt on your property.
Things to keep in mind:
Replacement Cost vs. Actual Cash Value: Do you want insurance that pays to rebuild your house at today’s prices, or are you okay with a payout based on depreciation? Understand the difference and choose what makes sense for your budget.
Natural Disasters: Most standard policies don’t cover floods or earthquakes, so if you live in a high-risk area, you’ll need extra coverage.
Liability Coverage: If someone gets hurt at your place and sues you, make sure you’ve got enough liability coverage to protect yourself.
Renters Insurance: If you’re renting, don’t forget to get renters insurance. It’s cheap and covers your belongings from theft, fire, or other disasters, and includes liability coverage. Plus, you can bundle it with your auto insurance for savings.
3. Disability Insurance: Protecting your income
No one likes to think about getting sick or injured, but it happens. Disability insurance is your safety net if you can’t work for an extended period due to illness or injury. Without it, losing your income could be financially devastating. You're also much more likely to get disabled prior to retiring than pass away early. According to the Social Security Administration, 25% of 20-year-olds will become disabled prior to reaching retirement age.
Things to keep in mind:
Employer Coverage: Many employers offer short- or long-term disability insurance, but it usually covers only 60% of your salary. Make sure you know the cap and whether that would be enough to live on. If not, consider getting additional coverage.
Short-Term vs. Long-Term: Short-term disability covers you for a few months, while long-term can keep paying out for years. Figure out what you’d need in both scenarios.
Policy Limits: Pay attention to the maximum monthly payout and how long you’ll be covered. If your income or expenses are high, you might need more than what’s offered.
4. Life Insurance: It’s Not Just for Parents
Life insurance is something many of us push off, but it’s not just for people with kids. If you have a partner, own a home, or even just have debt, life insurance can be a smart way to make sure your loved ones aren’t left in a financial bind if something happens to you.
What to keep in mind:
Term Life vs. Permanent Insurance: Term life insurance is straightforward and affordable—it covers you for a set number of years (like 10, 20 or 30) and pays out if you die within that period. Whole life insurance includes a savings component and is more expensive but lasts your entire life. For most people, term insurance is the best option.
Beneficiaries: Review your beneficiaries regularly. Life changes fast—make sure your policy reflects your current situation.
5. Auto Insurance: Because Accidents Happen
Auto insurance has very little to do with your driving skills, but rather those around you. It protects you from paying out-of-pocket for damages, medical bills, or lawsuits after an accident.
What to keep in mind:
Liability Coverage: Your state’s minimum might not be enough to cover a serious accident. It’s worth considering higher limits if you have significant assets.
Comprehensive and Collision: These cover damages to your car whether it's from an accident, theft, or a random tree branch falling on it. Especially important if your car is new or valuable.
6. Umbrella Insurance: Extra Peace of Mind
If you’ve built up some savings or own property, consider getting umbrella insurance. It provides extra liability coverage on top of your homeowners, auto, or renters insurance. It’s like a security blanket in case a lawsuit maxes out your standard coverage limits. In general, if you're net worth exceeds $1 million, you should have an umbrella policy.
Disclaimer: None of this should be seen as advice. This is all for informational purposes. Consult your legal, tax, and financial team before making any changes to your financial plan.