Where to start when buying insurance

Insurance shopping is far too often on the bottom of a millennial’s to-do list. If auto insurance weren’t mandated by law in order to be behind the wheel of the car, that too might be a “meh, I’ll think about it later” situation. It’s understandable that when money feels tight, the idea of yet another bill is daunting. Plus, you might be thinking you don’t really need complete coverage. The thing is, proper insurance coverage is a foundational part of your financial life. There are myriad forms of insurance, but here are three you should know and have to get started:

Auto Insurance. You can’t drive without auto insurance, so it’s a no brainer. But the policy itself can sometimes feel like a mindbender. Auto insurance usually has several policies all rolled into one. First, it’s good to know that your monthly payments are inversely related to your deductible. That’s a fancy way of saying having a high deductible (meaning more out of pocket for you if an accident occurs) means a paying a lower monthly premium and vice versa. A few things you should know when looking for auto insurance:

  • Your state’s minimum insurance requirements.
  • What your deductible will be – how much you have to pay out of pocket before your insurance kicks in. (You should probably have that amount in an emergency savings fund).

A few policies you are likely to see include:

  • Collision – it’s just like it sounds. This covers the repairs to your car after an accident, and is probably what you’re immediately thinking about when you think auto insurance.
  • Liability coverage – this is what you want if the accident is your fault.
  • Bodily injury liability (BIL) – this money helps cover medical expenses for people injured in an accident you caused. Often described with a ratio like 20/50 meaning the insurance covers a maximum of $20,000 per injured person and up to $50,000 total for everyone in injured in the car you hit.
  • Property damage liability – will cover the damage done to another car if you caused the accident. Often described in a ratio like 20/50/10 – it’s tacked onto BIL and the 10 means the company will pay $10,000 for damages to the car.
  • Personal Injury Protection (PIP) – this covers the medical expenses for you and the people in your car. It may also include lost wages if you’re unable to work.
  • Comprehensive – this one gets you coverage if your car is stolen or damaged outside of an accident.
  • Uninsured/Underinsured motorist – is when your insurance provider covers the financial gaps left when someone who isn’t insured causes an accident.

Renter’s Insurance. I’ll admit, it took me far too long to get my renter’s insurance policy in place. And now that I’ve had a pipe burst in the bathroom of my apartment, I can rest easy knowing I’m covered if future incidents destroy my belongings. Even though I’m a renter and didn’t have to pay for the repairs to the pipe, I could’ve been on the hook if the crashing ceiling destroyed my possessions. Or what happens if the upstairs neighbors don’t extinguish the incense I always smell them burning before they leave the apartment? My landlord’s insurance would cover the building, but that doesn’t extend to my personal belongings.

Even though it doesn’t feel like I own much, having to replace everything in my apartment including items like clothes, make up and cooking utensils would add up fast. Renter’s insurance can also cover the cost of my liability if anyone injures themselves in my apartment. It only costs me $15 a month to have $20,000 coverage in replacement costs and $100,000 in personal liability.

Life Insurance. Life insurance seems to be one of the hardest products to convince a millennial they need, especially if they’re single with no dependents. But student loans are actually one reason you may need a basic life insurance policy. A friend of mine has tens-of-thousands of dollars in co-signed student loans with a private lender, who would be able to go after his parents for the payment should he die prematurely. When he realized that his death could mean his parents would have trouble retiring, he took out a basic term-life insurance policy that costs him around $24 a month for $100,000 in coverage.

What is term life insurance? Term-life insurance offers you coverage during a specific period (aka term) of your life. The common policies are 10, 15, 20 or 30 years. This means if you die during that span of coverage, then your beneficiaries will receive a payout. If you don’t die during that period, the policy expires with no cash value. Because it expires with no cash value, the monthly premiums are often significantly lower than other forms of life insurance.

When I plugged in my details, I’m eligible for $450,000 in coverage for $33.16 per month for term life insurance. A $1,000,000 policy would set me back $64.34 – about the same as I pay for my cell phone.

Why get it now? First of all, it will be cheaper. The younger and healthier you are the more affordable your monthly premium. Part of the reason is that if you lock into a 30-year term life insurance policy at 25, it will expire at 55. If you want until you’re 45, then it expires when you’re 75. It’s more likely you’ll still be alive at 55, meaning the death benefit won’t get paid out, so the coverage would be cheaper. If you’re 25, but know you plan to get married and have children, then you’ll get a cheaper policy locked in at 25 than 35.

Why wait? Before you assume you can’t afford proper coverage, but sure to actually check and see how much it would cost. It’s possibly just $50 a month could get you a decent term-life insurance and a renter’s insurance policy.