As we age, the type of insurance we need to obtain varies greatly depending on our health, housing, financial, and life situation.
This means insurance plans not only get more complicated and expensive, they become harder decisions that we don’t want to face until something bad really happens.
Since insurance falls under the taboo subject of money, most people donât talk about it and as a result, do not have insurance.
There are staggering statistics about how financially illiterate Americans are about how to manage their money.
What is most surprising is that 60% can’t afford an unexpected $400 emergency expense.
Spending a little more upfront for insurance will help cover that cost so your medical bills or accidents wonât be double and covered under insurance.
First off, what is insurance?
Insurance is to protect yourself, family, and your wealth in case of any emergencies.
Similarly to when you go on vacation or book a flight, there is an option to pay insurance in case something happens and you wonât have to pay out of pocket exuberant fees.
Just like going to the doctor, instead of paying upwards of $500 for a visit since that is the typical cost for 15-minute check-in with a patient, you are paying roughly $100-$500 in insurance each year so that cost is really is $2-$10 or so each visit.
It’s like the COSTCO system.
You pay for large quantities than more each time.
As you hit cerian life milestones, some policies, including health insurance and auto insurance are required.
Some such as life insurance and disability insurance are encouraged as well.
So what does this mean and why do I have to pay for something that might not ever happen?
Insurance is considered an umbrella policy.
Just like a rainy day fund in case an unexpected payment or pandemic hits that you become furloughed, you are able to rely on the cash in that fund to keep you afloat until you find a new job.
When you get older, your risk of problems increases, dramatically.
There is no stopping this.
That’s the curse of life.
This means more problems and troubles arise including, health visits such as screenings for colon and breast cancer, cognitive function decline, most of the time you have to start wearing glasses because your vision becomes less clear as you become older, the risk for COPD since you may or may not have been living in a city with open windows smelling fumes from the cars or your life or living with a family member who smoked and lastly, with old age comes less energy, focus, and agility.
And this list is not nearly done.
As a retiree, you are depending on your income that you worked hard to earn all your life along with your 401k, ROTH IRA or both and have to be cautious about spending and cannot work.
When getting started evaluating when you should plan on speaking with an agent from insurance groups such as All-State to State Farm, age is the best indicator of what you need.
In the long run, investing in something that might not get you a return right now but a safety blanket during unexpected times for the future is so worth it as it will keep you mentally sane, comfortable, and stable in case another bat comes spreading a deadly disease from China.
Insurance isn’t all about protecting you and your familyâs lives, it is also protecting your wealth.
If you own a large number of assets, traditionally more than 5 million, estate planning and establishing trust and for everyone, a will, is your best bet to reducing the hassle your family might have to go through, especially if you have siblings and a lot of estates.
You won’t have to be in court to divide your assets and avoid lawyers, and more fees once you pass.
Insurance is preparing your family to have the least stressful time with your stuff.
The upfront cost of establishing a trust is in the 7-20k range but is worth it for your family when dealing with 1-5k fees in court when you pass which is the last thing they want to deal with.
Why Insurance Is Skeptical
Well, as with the markets and election, life is unpredictable.
As a result, accidents, illness, and disasters do happen and it can plunge you into deep finial ruin if you don’t have insurance to cover these exorbitant expenses to help keep you afloat.
It is also very personalized but unfortunately, no one is immune to dealing with tough times.
As Iâm turning 20 this month, all I have and need is health insurance and car insurance.
My health insurance is in place so I don’t have to pay $500 each time I visit the doc to get a flu shot and car insurance in case I scratch someoneâs car backing out of the grocery parking lot to getting a flat tire.
These dreaded costs will be free or minimal since I paid upfront with insurance each year.
Breaking it Down By Age:
20âs: The Earlier The Better
Health Insurance
As I outlined above, I have health insurance and as do all Americans so they can afford healthcare.
Of course, if you go to another industrialized and first world country such as Canada or Europe, not only the college is either free or half the price compared to in the US along with maternal/paternal leave is double the time, health insurance is completely free!
Unfortunately, weâve not come to that conclusion in the states so we have to pay for it.
Having health insurance is key to avoiding medical debt, one of the largest sources of debt among consumers in the US.
So where do I actually get health insurance?
Before I became an NYU student, I got my health insurance from BlueCross Blue Shield.
Now I get it through my school on my motherâs health insurance plan through the same provider, BCBS.
If are you working, some 158 million Americans get their health insurance through their employer according to the Commonwealth Fund.
But if you donât have health insurance through your job and work minimum wage, paycheck to paycheck as a student, you can get it through school or shop for private insurance options to compare rates through a Health Insurance Marketplace such as Policygenius (this is not sponsored).
Once I hit 26, I have to have my own coverage which will be a bit more pricey not under my mother’s name.
Auto Insurance:
49 out of the 50 states require drivers to have auto insurance to cover any potential property damage that may result from an accident.
These rates are based on your age, credit, car model, driving record, and home state/primary residence.
The average cost of car insurance is a whopping $125 per month and the only way to get out of it is to move to the state that doesnât require it or not drive at all.
Iâll leave that up to you to guess which state doesnât require itâŚ
You will be kina shocked becuase I only imagine cars there.
Less Common in your 20âs:
Renters Insurance
If you arenât living with your parents anymore and moved out to buy a place of your own or with 6 other roommates snuggled in a studio, it is best to get this insurance so you are covered if your landlords accuse you of trashing their place or making a hole in their wall.
Most people pay between $15-$20 a month but this will vary greatly depending on where you live.
This covers the replacement of any damage that might happen that could cost you upwards from $20 for a broken lamp to $10k for a warm fridge.
Better be safe than sorry.
30âs:
Now since weâve passed my decade of the Roaring ’20s, let’s head on to presumably the majority of readerâs age the good old, but still young 30âs.
Don’t worry, you are still young.
Disability Insurance
Now, it might seem frightening to think about being disabled this young but it is estimated by the Social Security Administration that over 25% of todayâs 20-3o-year-olds will be disabled BEFORE retirement.
That is just disappointing but not to fear, thatâs why insurance is here!
Especially once you start growing a family and if you are the main bread provider in the family when your family is relying on you to keep them alive, you should certainly have disability insurance.
What disability insurance will do is replace your income in the event of an on-the-job accident, but also for any chronic illnesses that might arise from your job such as burnout.
But don’t fake it you need proof of burnout such as migraines or consistently missing the train stop, etc.
Life Insurance
Now, this is huge and very vague at the same time.
Similarly to disability insurance where the dependant is recommended to obtain this, if a family member or even aging parents relies on your income for their financial well-being, this is a must.
2 Types:
Term Life Insurance: Provides coverage for a fixed amount of time, typically 10 to 30 years
Permanent Life Insurance: You can get a better deal for a more expensive option that lasts longer because there will be a less expensive rate for each year you live.
Where does the price come from?
Depending on your age, life circumstance, how many people are relying on you, and how much coverage you want your dependents such as kids or spouses to have will vary greatly on the policy you get.
The average amount is between $300-$400 per year.
Homeownerâs Insurance
If you take out a mortgage for a home, most lenders (banks) require you to get this insurance which covers everything from the roof to your flooded basement.
What is considered in the price?
Home location, size, age, and structure are the main components.
Homes in Californiaâs Calabasas and Silicon Valley areas where wildfires are prevalent have higher costs to homeowner’s insurance since those properties have a higher chance of being damaged each year.
Cost of WaitingÂ
Forgoing life insurance purchases at a young age can be costly. The average cost of a 20-year level term policy with a $250,000 face amount is about $214 per year for a healthy 30-year-old male. In contrast, the annual premium for a 40-year-old male is about $486. The overall cost of delaying the purchase for 10 years is $2,720 over the life of the policy according to Investopedia.
40âs
The golden age?
I donât know but it is getting closer to the halfway mark so buckle up your seat belts!
It’s time to become more cautious and remember to eat your veggies to stay healthy and strong.
Long-Term Care Insurance
Medicare (the government run health insurance program for Americans 65+) does not cover this insurance.
Typical.
Those who are aging, disabled, and need help with daily living in a nursing home will need this.
The reason why this is mentioned in your 40âs and not 70âs is so you can plan.
Yes, you might be the 100-year yogi who goes hiking and swimming each morning and have no health problems or be dependant on going to the bathroom with a nurse.
You can never expect what will happen and as a result, you need to put a good chunk of change down because you will only need to contribute more the older you get.
Long-term care policies incrementally increase premiums as you age.
Time is your friend.
With life insurance, the younger the better becuase you will qualify for lower premiums.
The American Association for this insurance (LTI) recommends that individuals take out a policy in their mid-50âs so you will have enough cash reserves for when you are in your 70âs and 80âs.
Women VS. Men Reminder
Since women live longer, on average women need services longer than men, about 3.7 years to be exact.
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There is a reason I stopped at 40.
No, I didnât get lazy to finish at 90 or too stressed out about the number of plans we need by graduating college.
The truth is, if you have these plans in place and follow this order, you will not need to establish any more insurance plans in your life becuase there arenât any more left!
As with everything from eliminating procrastination with a school paper to eating earlier to promote intermittent fasting, the earlier you start with planning out life’s unexpected circumstances, the more comfortable and stable you will be during the next recession, pandemic, and downturn in your life.
Be a strong leader in your life and face the fact that nothing will always go your way.
Expecting the worst is the best decision you can make.
Be realistically pessimistic and you will turn into a happier person.
Cheers!
Don’t cling too hard!