Insure Yourself

Upon entering the working world, you will find yourself staring into a hideous tangle of costly insurance plans. Know your needs before doling out the cash.

Insurance of any kind is just not something you've necessarily had to obsess over in the past. The process of buying a policy can be tricky, and the sooner you begin considering your options, the wiser the decision you'll make when the time comes. While you're making your financial plans for the future, consider the following as a guide:

Do I need insurance, and what kind is best for me?

Yes, you do need insurance. Most people think about insurance as a means of fixing things that are broken. These days, having insurance can also mean the difference between bankruptcy because of unexpected bills or a liability lawsuit, and not losing everything. You may not have a lot now, but you need to protect it and what you may have in the future.

You don't need to have every kind of insurance right at this moment. Life is about changes, and the kind of coverage you need changes right along with it.

Here's a basic formula:

  • If you are single with no dependents, you need health and auto, and possibly disability and property insurance, depending on your circumstances.
  • If you are married, but still without the rug rats, you need life, health, auto, disability, and property.
  • Once you and your spouse have children, you'll need to have all of the above, and check that you have enough coverage.

Health Insurance

If you are unemployed, or your new employer doesn't offer health benefits, here are some options:

  • You may be able to stay on your parents' policy for up to six months after you graduate. Check the policy to be sure.
  • Open a medical savings account. You deposit money in a special account to pay for medical expenses. That deposit is tax deductible, and the interest earned on the account is tax-deferred.
  • Consider short-term medical insurance.
  • Get a new job, one that offers health benefits.

Life Insurance

If you are married or have children, life insurance benefits ensure that your dependents are taken care of financially after you die. In your 20s or 30s, term life is the way to go. It is less expensive, and the premium is fixed for the length of the term, usually 5 or 10 years. The premiums are based on your age (younger=cheaper) and the amount of coverage you want. A general rule for determining the amount of coverage that you need is to get a policy that is for five to eight times the amount of your current salary.

Disability Insurance

Your health insurance covers the medical expenses, but what if you have to take significant time off of work due to a serious illness or injury? Think disability insurance. It's offered through your employer, but make sure you read the fine print. These benefits typically provide up to 60% of your taxable income while you are incapacitated. Even on a small salary, it can be quite affordable.

Auto Insurance

People try to get away with not having for the same reason they don't have health insurance: It's expensive. However, nearly every state requires that you have minimum levels of auto insurance coverage. Some states won't let you register your car without proof of insurance. If you have a car loan, the lender will require that you have insurance to protect their investment. Check with your agent to find out what the minimum requirements are for the following kinds of coverage:

  • Bodily Injury Liability
  • Collision
  • Comprehensive Coverage

These are the basics that will protect you, your car, and anyone in the car with you. Don't worry too much about the cost. It will go down once you hit age 25.


If you rent, think about renter's insurance. It isn't very expensive, and it covers losses from theft, or from fire or water damage think about how much it would cost just to replace your wardrobe all at once. However, if the only property you have to protect right now is a black and white TV with poor reception and Great Aunt Sophie's old living room set, you can probably wait on this one.

A good thing about renter's insurance, though, is it will also cover your responsibility to other people who become injured while at your home. Think pet bites, falling chandeliers and aging stairwells.

Getting the best rates

Once you've decided on the types you'll need, there are a few more steps you can take to make sure you're being smart about insurance:

  • Comparison shop, because prices and plans can vary widely between providers.
  • Choose an agent with CLU (Chartered Life Underwriter) or ChFC (Chartered Financial Consultant designation. They've made a commitment to pursue additional education and uphold ethical standards.
  • Whenever possible, get insurance through your employer to take advantage of group rates.
  • Take the highest deductible you can afford. You'll pay more if something happens, but you'll probably pay less in the long run because of the lower premiums - the odds are in your favor.
  • Don't let an agent talk you into anything you don't need (such as flight, credit card or dental insurance above and beyond what your employer offers).

You may someday have a reason to look into other kinds of insurance, and you may have the money to pay for it. But start with the basics: Health, life, disability, auto, and property. You'll be glad you did.

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