What Types of Insurance Will You Need After You’re Out of High School?

As young adults transition from high school, they often embark on new journeys such as higher education, entering the workforce, or establishing independent living arrangements. This period brings increased personal responsibility, including the need to manage potential financial risks. Securing appropriate insurance coverage is fundamental to sound financial planning during this new phase of life.

Understanding Health Insurance Coverage

Health insurance is often one of the first types of coverage young adults consider, providing financial protection against unexpected medical costs. Without adequate coverage, even a minor illness or injury can lead to substantial debt.

One common pathway for young adults is to remain on a parent’s health insurance plan. The Affordable Care Act (ACA) allows dependents to stay on a parent’s plan until they reach age 26, regardless of their marital status, residency, student status, or financial dependency.

For those entering the workforce, employer-sponsored health insurance plans are a widespread option. Many employers offer group health policies as part of their benefits package, often contributing a portion of the premium. These plans can be a cost-effective way to obtain comprehensive coverage, including medical services, preventive care, and prescription drug benefits.

Students attending colleges or universities may find health insurance options through their educational institutions. “Student health plans” are specific policies available to enrolled students. While they count as health insurance under the ACA, their benefits can vary. Some universities may require students to have health insurance and automatically enroll them unless they provide proof of alternative coverage.

If employer or student plans are not available, individuals can explore options through the Health Insurance Marketplace established by the ACA. These marketplaces offer a range of plans. Depending on income and household size, individuals may qualify for subsidies to help lower monthly premium costs or reduce out-of-pocket expenses. Medicaid also provides free or low-cost health coverage for those with lower incomes, with eligibility criteria based on income and family size. Some young adults who were in the foster care system may be automatically eligible for Medicaid until age 26.

Navigating Auto Insurance Needs

For many young adults, driving is a daily activity, making auto insurance a necessity. Most states legally require drivers to carry at least a minimum amount of auto insurance coverage to protect others from financial hardship in the event of an accident.

A fundamental component of auto insurance is liability coverage, including bodily injury and property damage liability. Bodily injury liability helps cover medical expenses and lost wages for others if the insured driver causes an accident, while property damage liability helps pay for damage to another person’s vehicle or property. Drivers often consider increasing their liability limits beyond state minimums to provide greater financial protection against potential claims.

Beyond liability, collision coverage addresses damage to the insured’s own vehicle resulting from a collision with another vehicle or object, regardless of fault. Comprehensive coverage, in contrast, covers damage to the insured’s vehicle from non-collision events such as theft, vandalism, fire, or natural disasters like hail. These coverages are often required by lenders if a vehicle is leased or financed.

Uninsured/underinsured motorist (UM/UIM) coverage protects the insured if they are involved in an accident with a driver who either has no insurance or insufficient insurance to cover the damages or injuries caused. Factors influencing auto insurance premiums for young drivers include their age, driving record, the type of vehicle they drive, and their location, as younger drivers are statistically considered a higher risk due to lack of experience and higher accident rates.

Securing Renters Insurance

As young adults move into their first apartments or shared living spaces, renters insurance becomes a relevant consideration. Many new renters mistakenly believe their landlord’s policy covers their personal belongings, but it protects the building structure, not a tenant’s possessions. Renters insurance provides financial protection for personal property against various perils, such as theft, fire, and certain types of water damage.

Personal property coverage helps replace belongings like electronics, furniture, clothing, and other valuables if they are damaged or stolen, even when they are not in the rented dwelling, such as items stolen from a car or during travel. The coverage amount should reflect the total value of one’s possessions, and creating a home inventory can assist in determining appropriate limits.

Renters insurance policies also include liability coverage. This protects the tenant if someone is injured in their rented space and they are found legally responsible, helping to cover medical expenses or legal fees. Coverage for additional living expenses (ALE) is also common. If the rented unit becomes uninhabitable due to a covered loss, ALE coverage can help pay for temporary housing, meals, and other increased living costs.

Renters insurance is affordable, with average costs ranging from $12 to $27 per month, depending on location, coverage limits, and deductible chosen. This relatively low cost makes it a practical investment for protecting personal assets and mitigating potential financial burdens.

Considering Other Insurance Types

Beyond the immediate needs for health, auto, and renters insurance, other types of coverage may become relevant as a young adult’s life evolves. While not concerns right after high school, understanding their purpose can aid future financial planning.

Life insurance provides financial protection for dependents in the event of the insured’s death. It is valuable for individuals with financial obligations to others, such as a spouse, children, or outstanding debts like student loans or mortgages. While many young adults may not have dependents immediately, purchasing a policy at a younger age often results in lower premiums due to better health and age.

Disability insurance offers income replacement if an individual becomes unable to work due to illness or injury. It can help cover essential living expenses like rent and utilities, and manage debts if income stops. This type of insurance becomes increasingly relevant as a person establishes a career and relies on their income for financial stability, with younger individuals often qualifying for lower premiums.

Travel insurance can be a consideration for specific trips, especially international travel. It may offer coverage for emergency medical needs abroad, trip cancellation or interruption, and lost baggage, providing a layer of security for travel plans. These policies are short-term and tailored to the duration and nature of the travel.