Too young for insurance? Basic types of insurance for young adults: 4 reasons to get covered

You're a young adult, with your whole life ahead of you. You may be settling into your first career. You might be working in another field while you strive to land your dream job. Perhaps you’ve just moved into your own apartment or jumped into home ownership. 

Whatever your situation, you know there'll be bills to pay: your rent or mortgage, utility bills, monthly costs for phone and internet services, and don't forget those car and student loan payments. You're earning enough to pay taxes now, too, and ideally trying to set aside some savings. 

With all the financial responsibilities young adults have to manage, insurance premiums may seem like just another cost that could strain the budget unnecessarily. However, there are benefits to being insured early in life, and some types of insurance are appropriate and necessary for people who are just starting out.

Why young adults should get insurance now?

Insurance can be considered the "protection" part of your financial plan. It’s there, just in case, to help you or your family cover unexpected costs if something terrible happens. You can use insurance to safeguard your most valuable assets and preserve what you already have. Moreover, obtaining insurance while you’re young ensures that you’ll be protected as you work hard to acquire more in the future. For example, securing life insurance early can ensure that your future family is financially protected.

4 benefits to get insurance when you are young

Think about these four important advantages to setting up an insurance policy in your 20s or 30s:

• You might be able to lock in lower premiums, based on your current health status, for a period of time
• You can protect your household from loss of income – which can derail a lot of financial plans and goals
• You can make up for the fact that you probably too early to accumulate a large emergency fund 
• You can make sure dependants, if you have them, aren’t left scrambling financially if something happens to you

3 Basic types of insurance for young adults

1. Term insurance - simplest type of life insurance

Term insurance pays your beneficiary a lump sum on your death. You choose the amount of coverage – for example, enough to cover funeral costs or enough to sustain your family's standard of living for several years. You also choose how long you want to have that coverage and lock in the premium price for non-renewable term plans – often for 10 or 20 years.

One of the best things about getting term insurance while you’re young is that you can generally either renewing it until you reach a certain age or convert it into another selected life insurance plan, depending on the Insurer. 

2. Critical Illness insurance - lets you focus on recovery

Critical Illness insurance pays you a lump sum if you diagnosed with one of a covered critical illnesses in the policy. 

The lump sum payout from either term insurance or critical illness insurance can be used for any expenses needed like paying for extra help around the house or with childcare, allowing a family member to take time off work to help with your care or simply keeping your household financially afloat. 

With critical illness insurance, this may include accessing health care treatments., 

3. Behavioural insurance - Pay less when you make healthy lifestyle choices

Behavioural insurance is the latest innovation in life insurance. Programs included with some insurance policies reward you for making positive lifestyle decisions. You can get discounts on gym memberships, wearables and hotels to discounts on insurance premiums. By participating in these programs and maintaining a healthy lifestyle, you can qualify for discounts on insurance premiums. This means you’re directly taking control of your insurance costs – freeing up more of your budget for the things you want in life.

Insurance is evolving to meet young adults' needs

When young adults like you think about insurance, do you imagine a pile of paperwork full of terms that most people find difficult to understand? That’s your parents' (or grandparents') insurance, and things have come a long way since their day.

Insurance companies now recognize that everyone – and especially younger generations – likes to get things done quickly, efficiently and digitally. This understanding has led to a big push to make insurance simpler, faster and easier to understand. Many companies have embraced digital technologies, including the very focused and effective use of artificial intelligence (AI).

Insurance application processes have been streamlined, and some products no longer require medical exams and blood tests, as they once did. An online application with an instant decision (and therefore instant coverage) has become the norm for many insurance policies. Technology also means it’s now a much simpler process to submit claims and receive benefits payouts for many types of coverage. 

Speak with your financial consultant, who can run a financial needs analysis and recommend insurance protection solutions into your financial plan. 

This content was contributed by Solutions magazine.

(https://mysolutionsonline.manulife.ca/issues/spring-2023/think-you-re-too-young-for-insurance-.html)