By Darrell Bryant
Do you have insurance? It’s likely that your response is, “Yes, of course!” But did you know that you may need different types of insurance, and definitely different amounts of coverage, for each stage of your life? Yes, with different stages of life come very different insurance needs. Here’s a breakdown to give you some direction as you make insurance decisions to protect yourself from the risk and uncertainty that we all know 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.
Understandably, at this stage of life, we need proper health insurance coverages which include Medicare part A and B, a Medicare Supplement contract. Also, long term care insurance should be visited (unless we can mathematically demonstrate that you can self-insure).
With respect to life insurance, a common misconception in the financial services industry is that a person no longer needs life insurance at retirement. This belief stems from the fact that since kids are grown, educations have been paid for, and there is no mortgage, there is no need for life insurance. However, the most expensive component to insure at any age is income replacement, and this still needs to be addressed.
The unseen elephant in the room as we design income plans is the simple fact that we will lose a spouse at some point. When we do, the surviving spouse will be left with reduced income (Social Security and perhaps pensions). Additionally, the surviving spouse will find themself in a higher tax bracket (single versus married/jointly). Without life insurance or some other means of replacing this income, the surviving spouse’s lifestyle will almost certainly need to be adjusted.
What Stage Can We Help You With?
Insurance matters can get complicated and confusing, so no matter what stage of life you’re in, it’s always wise to seek help from a financial professional. We at D. Bryant Retirement Strategies are here to help you with your financial planning needs in your unique circumstances and stage of life. To learn more about what we do or to request a complimentary consultation, call us at (402) 932-2141 or email firstname.lastname@example.org.
Darrell Bryant, CFS®, CAS® is Omaha’s Retirement Strategist. As the founder of D. Bryant Retirement Strategies, he focuses on helping individuals and couples nearing retirement do so successfully. Along with more than 30 years of experience, he received the Certified Fund Specialist (CFS®) designation and a Certified Annuity Specialist (CAS®) designation from the Institute of Business & Finance. Passionate about helping as many people as possible in his community, he hosts Retirement Strategies Radio, heard Saturday mornings at 7:00 a.m. on 1110 KFAB. He has also written articles on financial planning that have been featured on Fortune.com, FoxBusiness.com, Money.com, and in the Midland Business Journal. To learn more, visit his blog, his website, or connect with him on LinkedIn.