By the time you reach your 30s, you should be learning how to (responsibly) handle your money. And that means investing in the right insurance. Without it, something as small as a trip to the dentist can land you in the red.
Generally in your 30s, it’s smart to be covered across five categories: health insurance, disability insurance, life insurance (in specific circumstances), renter’s insurance (if you’re renting), and umbrella insurance, according to Pamela Capalad, CFP and founder of Brunch and Budget.
But keep in mind that insurance policies are largely personal. Everyone’s situation and needs are different, and as your life changes (say, you get a new job or have a baby) so should your coverage.
One of the best things you can do to get the best coverage for your needs is to educate yourself: Get multiple quotes, read your policy closely before signing on, and don’t hesitate to ask questions when you don’t understand.
Let’s take a closer look at each type of insurance:
Without insurance, healthcare in the US is unaffordable for most people. But even if you feel as invincible as you thought you were in your 20s, don’t skimp on your health insurance policy.
“Your 30s are when you need to start getting your heart checked out regularly, your blood tests could actually start showing abnormalities you need to treat, and the healthy (or non-healthy) habits you’ve started to develop are going to solidify,” Capalad told Business Insider.
Don’t go for the bare minimum; pony up the extra cash to find a substantial policy that works for you.
Disability insurance protects you if you become injured and are no longer able to work. So if you’re relying on your income to live, it’s a good idea to get disability insurance.
“You are more likely to need this insurance than life insurance because disability covers inability to work and make money,” Capalad says.
Not everyone needs life insurance, but if you’re married or have kids, it protects your loved ones should anything happen to you. It can cover anything from funeral costs to paying off your mortgage, and it ensures that your family is taken care of if you die.
For most clients, Capalad recommends term life insurance policies over whole life ones.
“You need to make sure your loved ones are financially protected in case you die, and term insurance covers just that,” she says.
While it’s right for some people, Capalad tends to stray away from whole life insurance because most policies typically involve a “cash value” component, which is usually an investment of some kind.
“I don’t believe in mixing insurance and investments,” she says. “Insurance products need to be paid into every year or the policy will lapse and that can end up being a huge burden on you if your life changes dramatically.”
Renter’s insurance is rarely required, so it’s often overlooked. But if you’re still renting, it’s worth it the investment.
“Unfortunately, if you’re renting right now and something happens to the apartment, the landlord is not responsible for anything that happens to your stuff,” Capalad says. “For $20 to $30 per month, you can insure all your stuff against fire, burglary, water damage (make sure you get the extra rider for this), and you even have the option to get identity theft coverage.”
By your 30s, you’re likely starting to earn a significantly higher salary than you did at 22. If you’re a high earner or have significant assets, umbrella insurance protects you above and beyond your auto insurance and home and renter’s insurance limits.
“The most common case for [needing] umbrella insurance is if you get into a big car accident and get involved in a lawsuit,” Capalad explains. “Umbrella insurance will cover all legal fees and the settlement amount, up to the policy amount. Without umbrella insurance, you could end up owing hundreds of thousands of dollars out of your current assets and your future earnings.”
One last thing…
At the end of the day, insurance is there to protect your finances, not hurt them.
“Insurance is all about transferring your risk to another entity, like the insurance carrier. If you feel you can cover the potential disaster or incident with [your] savings or other assets, you can choose to opt out of insurance,” Capalad says.
Along those same lines, don’t feel pressured to purchase insurance that you don’t see an immediate need for.
“Insurance agents can be pushy and it’s always worth asking an unbiased third party if it makes sense for your overall financial plan,” Capalad says.
Libby Kane contributed reporting.