Insurance isn’t usually a fun topic to talk about, but it’s a necessary one. Many people believe insurance policies are not something to worry about until they’re “older”. This is definitely not a good habit to get into. Getting insurance in your twenties is one of the best things you can do to secure your financial future.
Before we get into the different types of insurances and why you should consider getting a policy, it’s first important to understand the difference between premiums and deductibles.
Premiums VS Deductibles
A premium is the amount of money you pay monthly to hold an insurance policy. They can range in price depending on the type of insurance and coverage, but you will be paying a set amount each month to keep the insurance policy active and in good standing. For example, I pay $65.00 per month for car insurance and $92.00 per month for health insurance.
A deductible is the amount of money you must pay before you can start accessing the benefits of your insurance policy. This amount of money is on top of your monthly premium. For example, I pay $65.00 per month for car insurance – this is my premium. If I get into an accident that causes damage to my car, in order for my insurance to payout the necessary money, I have to first pay a deductible – in my case, this is $250.00 out of my own pocket before insurance kicks in and covers the rest of the money.
The deductible is arranged when the policy is opened. If you have a higher deductible, you tend to have lower monthly premium costs. If you have a low deductible, your monthly premiums tend to be higher. It is important you understand the difference between then before opening up insurance policies.
Regardless of your age or health, it is always important to have health insurance. In Canada, you can stay on your parent’s plan (in most cases) until you turn 25. In the USA, you can stay on your parent’s plan until you are 26. Most employers offer health insurance through work. However, if you are self-employed or employed in a non-traditional setting, you will likely be responsible for opening your own plan.
Monthly premiums for health insurance can be a bit expensive, but it is very important you do not skip out on this. Just because you’re healthy and don’t have health concerns right now, does not mean you won’t have them later on. Many health insurance policies in Canada also cover extras such as dental, massage, physiotherapy, acupuncture, therapy, and many more.
There are so many different companies that will offer you health insurance, so it is important to shop around to find the best plan that fits your individual needs. Health insurance premiums may be expensive, but not having adequate coverage in the time of emergency can be even more expensive.
Renters / Homeowners Insurance
For most people that purchase their first home, homeowner’s insurance is one of the first things they purchase. Why? Because they want to protect their investment in case anything should happen. However, when you are a renter, it is just as important to get renters insurance.
If you rent your own apartment, you need renters insurance because your landlord’s insurance on the building or home you are renting will not cover your personal items. Just like homeowners insurance protects the investment of their home, renters insurance will protect your investment of personal belongings and furniture.
The monthly premiums for renters insurance tend to be quite inexpensive. You can work with the insurance company to figure out how much coverage you would need. Your monthly premium would be based upon how much money you are insured for.
Renters insurance often doesn’t just cover the things in your rented apartment: it can sometimes cover things that are stolen from you in public places. If you need a laptop for work, and often work in coffee shops, you can ensure your laptop against theft. In many policies, renters insurance can also cover bicycles, and other items you often use outside of your home.
This is a policy that many people in their twenties overlook, and unfortunately, don’t open. Many people don’t like to think about life insurance because of how “morbid” it can seem – you’re planning for your death, essentially. However, when it comes to life insurance, the earlier you open a policy, the cheaper it will be.
There are two types of life insurance: permanent and term. When I first opened my life insurance policy, I didn’t understand the difference between them, and I opened a term policy. However, after researching some more, I realized what I really wanted to open was a permanent life insurance policy. Thankfully, it wasn’t hard to switch.
Term Life Insurance
Term policy is exactly what it sounds like: insurance that will cover you for a predetermined amount of time. Once the time is finished on your term policy, you have the option to renew. But this often comes at a much larger monthly premium, even though you’re getting the same amount of coverage. For my term policy, I found out that if I was still paying the monthly premiums when I am 85, I would be paying over $8000 per month. Term policy’s premiums are usually dependant upon the age of the individual that owns the policy. Keep this in mind when you are opening a policy. Paying only $20 per month in your twenties sounds great, but it will be much higher than that as you get older.
Permanent Life Insurance
Permanent life insurance (also known as Term-100) is a life insurance policy that never expires. This means you do not have to renew it. You continue paying the premiums until you cancel, or until you die. This plan does not increase in price, and you know you will always be covered (as long as you continue to pay the monthly premiums).
People in their twenties often tend to overlook life insurance. This is because many don’t have dependents or people that are relying on them financially. However, it is still an important policy to open. The life insurance company will pay out a predetermined sum of money to your beneficiary (you can have multiple) upon your death. This sum of money can help cover funeral costs, pay off debt, or create generational wealth.
The cost of life insurance is fully dependant on how much money would like to have paid out to your beneficiary, but it also takes into consideration your age and health. To open a permanent life insurance plan, most companies will require a health exam, blood work, and a urine sample. This is not the case with term life insurance; these policies do not tend to need a medical exam. There are permanent policies that do not require a medical exam, but this often means you will be paying more in premiums each month.
Just like human medical expenses, animal medical expenses can add up very quickly. Animal health care is not free like it is for people in Canada. This is not mandatory if you own an animal, but if you care about the wellbeing of your pet, I highly recommend pet insurance so you’re able to provide adequate care in the event of an emergency or medical procedure. The cost of pet insurance is quite low. For two dogs, I pay just over $60 per month. Depending on the policy, the premiums may go up a bit each year.
I would argue that disability insurance is one of the top three insurance policies that everyone should have. If you rely on a steady paycheque to survive, you need disability insurance. With disability insurance, you can ensure that if you become disabled or unable to work that you will continue to live the same lifestyle you currently live.
If you’re employed in a traditional setting, your employer may offer some type of disability insurance. However, if you are self-employed, you are going to be responsible for getting your own policy. The policy prices are dependant on what you do for a living, how much you would need to live on, and your past medical history.
Unfortunately, disability insurance can be a bit difficult to get, depending on your income and how much you would need as a payout if you were to become disabled. For example, for my insurance policy, I am in the “professional series” group. This means I get the highest payout possible due to my job if anything were to happen to me. This also means it was a bit more difficult to get. Your insurance company will do a full, thorough background check into your medical history. They will contact your doctor, and the MIB in order to gather the information they need. During your medical interview, it is very important that you are honest with them about any health issues you have, or have had in the past.
This is a very well known type of insurance, and it is mandatory to have if you own a vehicle. There are many different types of car insurance. What they may or may not cover is something that will need to be discussed with your insurance company. For example, some plans only cover the other person’s car in the chance to get into an accident. Some offer comprehensive coverage for both vehicles and all property involved in the accident. Car insurance also ensures that if you hurt or injure someone else with your vehicle, or if you damage someone else’s vehicle or property, that you are able to financially cover any of the costs associated with the damage.
Although many of the insurance policies mentioned above are not mandatory, they are still very important to have in the case of an emergency. Insurance policies are there to protect your hard work and your earnings. Emergencies happen to everyone; regardless of whether they believe it or not! It is important to be ready for them with proper insurance.