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What Insurance Do You Need at Each Life Stage?

Starting Out, Building a Family, Established, Retirement

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Having the right insurance can help protect you, your family and your property against unexpected and potentially financially disastrous events. When a major problem strikes—for instance, an auto accident occurs, an illness or accident involves you or a family member, a storm hits your home—having the right insurance can protect you from major financial loss and often lower emotional stress.

Insurance needs aren't static, however. As your life and that of your family changes over time, insurance needs also change. This reports profiles some important points and questions to consider for each important type of insurance at various life stages. We'll look at auto, health, home, life and other types of insurance.


Managing Your Insurance Needs—An Overview

No matter what your insurance needs, taking several key steps will help you manage insurance options so that you get the best coverage at the best costs for where you are at any time of your life.

  • Consider how each type of insurance fits into your overall financial planning goals. Just like emergency savings, retirement savings plans, or college savings plans, insurance is an important tool in planning to meet your financial goals, including wealth protection and growth.

  • Review your goals and your insurance needs and holdings regularly. Look at your needs not only upon major changes such as getting married, buying a home, or retiring, but also at regular intervals such as at policy renewal or every three years. Also review your options upon smaller changes such as buying a new vehicle or taking a new job.

  • Always compare options offered by different companies and/or different plans within a single company. Look at coverage and benefit details, costs, and limitations.

  • Consult an experienced, credentialed insurance and/or financial planning professional as appropriate. A good professional can help you analyze and create a total plan that best meets your needs.


Auto Insurance

If you own a vehicle, you have auto insurance. Even though you may be most familiar with this type of insurance, there are important issues to consider at different times of life.

  • Starting Out

    • If you own the vehicle—it's titled in your name, you will need to have a separate auto insurance policy, even if you still live with your parents.

    • Consider insurance part of the cost when you buy a new vehicle. Certain makes and models have higher insurance costs. New vehicles usually have higher costs than older models.

    • Taking a driving safety course or driver's education may lower your rates. Drivers aged 16-24 have the highest accident rates per 100,000 drivers.

    • Because the costs of a vehicle crash can affect your finances for years, it's usually wise to have more coverage than the minimum required by state laws.

  • Building a Family

    • Just married? Have two or more vehicles? Putting all vehicles on one policy typically saves on cost.

    • Carpooling with young kids? You may wish to consider increasing liability coverage or adding an umbrella policy that can help protect your assets from a lawsuit resulting from a vehicle crash or accident in your home.

  • Established

    • Adding a teen driver to your policy? A teen driver on your policy may increase rates 50 – 100%. It's a good time to consider costs among different companies and policies.

    • Consider allowing a teen driver to drive only one family car, preferably an older model from which you may wish to remove collision insurance. Encourage student drivers to maintain good grades and to take driver's education.

    • Commuting to work? Using public transit for the commute and using a vehicle only for weekend and around town errands may lower premiums.

    • If you haven't considered increasing liability or umbrella coverage, now is a good time to consider it.

  • Retirement

    • Older drivers, ages 55-70, may qualify for a discount, so ask. Drivers older than 75 have higher accident rates and therefore may have higher premiums.

    • If you are older, limiting your driving may qualify you for lower rates. Typical limits are driving only in daylight hours or driving less than 7500 miles per year.

    • Participating in a senior driving refresher course may lower your premiums.

    • Can you live comfortably with just one vehicle rather than two?


Health Insurance

Most working Americans get their health insurance coverage from their employers. Older adults are typically covered by Medicare and supplement policies. But there are also many millions who work for small employers that don't provide coverage, who are self-employed, or who are unemployed. The provisions of the Affordable Care Act will also have an effect on coverage for most of us. So now's a good time to explore what the new laws may mean for you. Two good resources are www.healthcare.gov from the US Department of Health and Human Services and links to state implementation information is provided on this site from the National Association of Insurance Commissioners.

  • Starting Out

    • Tempted to skip health insurance because you are young and healthy? Don't. An accident now (perhaps you blow out a knee during weekend recreation) could cost many thousands and set your financial plans back many years.

    • Because they are typically healthy, young adults typically pay the lowest insurance premiums.

    • Ways to further lower premiums may include choosing a plan such as an HMO or having a high deductible.

  • Building a family

    • Married and both covered by employer's insurance? Can one spouse be covered on the other's policy? Compare which options offer the best coverage at the least cost.

    • Expecting a child? Compare plans to see which offers the best coverage. Be sure to register the newborn with the policy during the required registration period.

    • Does your employer offer Health Savings Accounts (HSA)? Setting up appropriate accounts may allow you to cover many over-the-counter health costs and childcare with tax-free dollars.

  • Established

    • Know your rights under COBRA for your company in case you lose your job or change jobs.

    • Finished growing your family? Check whether eliminating pregnancy coverage is an option that will lower premiums.

    • Have college kids? Does your family health policy cover them adequately or should you purchase health insurance offered through the college or university?

    • If you are over 50, you may wish to consider long-term care insurance. Premiums are generally lower at this age than later.

  • Retirement

    • Are you 65 and ready to sign up for Medicare? Do you need supplemental insurance? A drug plan? Know your rights and how to enroll. These Nick's Reports provide resources: Turning 65 Soon? How to Enroll in Medicare. and Make Medicare Plan Changes: What Needs Review?

    • If you are not yet 65 but plan to retire, what health insurance options, if any, does your employer offer. Have your reviewed COBRA and individual insurance plan options?

    • If you have not yet purchased long-term care insurance, does it make sense for you?


Home Insurance

You insurance needs for your home and its contents may depend more on what type of residence you have than your life stage.

  • Renter

    • Although the building owner typically carries fire, disaster and liability insurance on the property, such insurance does not cover your personal possessions. Renter's insurance typically covers the value of your possessions and liability for events occurring within your residence. The cost is very reasonable.

    • If you have valuables such as jewelry, electronics, or furniture you may need a rider to cover the greater value of these items.

    • Keep an up-to-date inventory of your apartment's contents.

  • Condo or Co-op Owner

    • In this situation, the home-owners association will have a fire, disaster, and liability policy on the whole property. As the owner of an individual unit you will need to purchase a policy to protect your personal possessions and liability.

    • You may need a rider to cover possessions of greater value, just as jewelry or furniture.

    • Keep an up-to-date inventory of your personal possessions.

  • Single-Family Residence Owner

    • Homeowners insurance will protect the building and your personal possessions. It is also important to consider whether you need extended liability or umbrella coverage.

    • Determine if you wish to insure your home for replacement value or actual cash value.

    • Be sure that you know whether your home requires flood insurance or if it would be wise to purchase it.


Life Insurance

  • Starting Out

    • If you are a young single with no dependents, you may wish to wait to purchase life insurance.

    • If you have persons who may depend upon you, such as aging parents, you may wish to consider term-life insurance. It has no cash value but provides a large dollar payout for relatively low premiums in the event of your death.

    • If you make good income, you may wish to consider permanent life insurance, such as whole life, as part of your financial plan. Permanent life insurance builds cash value while it provides a specific lump sum payment in the event of your death, but it is more expensive than term life.

  • Building a Family

    • If you are married, consider both spouses. Because both partners typically contribute to the household economy, even if one is not employed outside the home, life insurance is recommended for each.

    • Consider whether term life insurance or permanent insurance best meets your needs and your budget.

    • If you have children, be sure to include the full cost of child care in your decision-making.

  • Established

    • Term life insurance may help you provide protection for your family while freeing your budget to support school and college expenses and continue to build your retirement savings.

    • If you are considering a permanent life insurance plan or an annuity at this point to build retirement savings, be sure to study all the details of all options. Compare benefits, costs and limitations. Seeking the advice of a qualified financial planner who does not benefit financially from selling any policies may be a wise idea.

  • Retired

    • When grown children are no longer dependent on you, you may wish to decrease the amount of term insurance you carry. The same is true if your home is paid off.

    • If you are retiring and have a life-insurance policy provided by your employer, determine if it can be converted to an individual policy.

    • With eligibility at age 59½ and older to withdraw funds tax penalty-free from your IRA or 401K, you may be considering investing in an annuity, be sure to study all products and terms carefully. Seeking the advice of a qualified financial planner who does not benefit financially from selling any policies may be a wise idea.

    • Update beneficiaries for any permanent life insurance policies.


Other Forms of Insurance

In addition to these major forms of insurance you may also wish to consider other types of insurance. For instance, would loss of your income present difficulties for yourself and other who depend upon your income? If so, you may wish to consider disability insurance. In some cases, specialty health insurance that provides income replacement in the event of certain illnesses may make sense. A qualified insurance and/or financial planning professional can help you explore what options may meet such additional or special needs.


For More Information

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