This weekend's Wall Street Journal had a wonderful article about Perpetual Adolescence And What To Do About It. It was also the first time I had run across the hashtag "#Adulting" in a major publication. The article acknowledged that this hashtag has been gaining in popularity on Instagram and Twitter. The example from the article was, "Just paid this month's bill on time #adulting."
As the college year is quickly coming to a close, there's a topic that most people would prefer not to talk about: Insurance. Yes, we need it and it's very much part of #adulting in your early twenties. But, as I'm no expert in this area, I tapped Todd Erkis for his expert opinion.
Todd Erkis is FSA, CERA, MAAA, and professor of finance and risk management at Saint Joseph's University in Philadelphia. Prior to becoming a professor, he spent more than 25 years as an actuary, developing insurance products and helping set prices for insurance. His book, What Insurance Companies Don't Want You to Know: An Insider Shows You How to Win at Insurance, provides a guide to everything you need to know about insurance. Here's what he had to say about insurance for college graduates.
The Guide to #Adulting in Your Early Twenties: What New College Graduates Need to Know When It Comes to Insurance
As graduation day approaches, an estimated two million young adults in the U.S. will begin their journeys into the "real world." But there's still much more to learn beyond the university lecture halls. Learning to live as a grown-up - also known as adulting - can be a rude awakening for new college graduates as many move off-campus and begin to manage their own money for the first time.
One #adulting lesson that is particularly difficult for many people, regardless of age, to understand is insurance. Below, he provides his top tips to help young adults objectively determine the most important insurance they need and how to get the best price for it, so they can win at insurance #adulting.
5 Most Important Insurance Insights You Need to Know:
Insurance is key to protecting yourself against financial ruin -- Insurance is a strange investment in that people pay for it, but hope they'll never need to use it. Insurance may seem like a waste of money for young adults beginning their careers, but this investment may be the one thing that protects them against financial ruin for the rest of their lives. According to a Harvard University study, medical expenses account for approximately 62 percent of personal bankruptcies in the U.S. Additionally, an estimated half a million people in the U.S. will file for bankruptcy this year alone. Insurance is an important investment to protect your future, and you should look for insurance that protect yourself against the risk of financial ruin at the lowest cost possible.
All young adults need health insurance, even if they are healthy -- Some young adults think that health insurance is too expensive to purchase, but they can actually save money by purchasing it. Health insurance acts like a discount program for medical services, so those without insurance pay significantly more for medical services than those with it. Additionally, people who can afford health insurance but choose not to buy it have to pay a government-mandated fee called the individual shared responsibility payment. Most insurance companies kick dependents off their parents' policies when they turn 26, at which point they can opt in to their employer's insurance (group insurance), remain on their parents' insurance for an additional cost, or purchase a separate healthcare plan (individual health insurance) through insurance companies or their state's health insurance marketplace. (See How to Buy Individual Health Insurance) Regardless of which option you choose, all young adults need health insurance, even if they are healthy.
The second most important insurance for young adults is long-term disability insurance -- If a person becomes sick or injured and is unable to work for a period of time, long-term disability insurance protects them against loss of income. Young people just starting their careers may not have much money saved yet, but they rely on their current and future incomes, so long-term disability insurance helps them protect that income and their futures. For someone who is twenty-five years old, the probability of becoming disabled before retirement is more than three times the probability of dying. Since many employers don't offer long-term disability policies, one can be purchased through insurance companies.
Renters should purchase insurance - While young adults might have limited belongings, the belongings they do have are important and valuable, and should be insured. Renters insurance is a comprehensive way to protect all of your belongings in the event of theft or damage, and often protects these belongings both inside and outside the home. When purchasing renters insurance, it's important to have your property and belongings appraised every year to ensure proper coverage. Individuals can purchase renters insurance through insurance companies.
Make sure your car insurance protects you and not just the other person -- Paying the bare minimum price for car insurance might seem sweet, but this car insurance is usually designed to only protect the other person in an accident, and wouldn't cover a situation where you or your car is damaged. Make sure your car insurance is comprehensive and covers you, your car and the other car, should a collision occur.
And there you have it. For even more on this important subject, check out insurance expert Todd Erkis' user-friendly guide to insurance: What Insurance Companies Don't Want You to Know: An Insider Shows You How to Win at Insurance.
As I've discovered the hard way, what you don't know CAN hurt you. So in addition to insurance, I recommend that you start early and review the Three Most Important Decisions You Will Ever Make. I sure wish I knew then what I know now. (Don't we all?)