Why younger people need to look into health insurance

Adulthood often feels like managing an endless to-do list and having to make major decisions with minimal to no information or experience – but with potentially dire consequences.

That may sound melodramatic, but everything from buying a home to picking a health insurance plan comes with significant financial consequences if you make a misstep. Perhaps a feeling of decision fatigue is why so many people, especially millennials and Gen Z, find themselves without proper insurance coverage.

It’s hard to find the perfect balance of necessary insurance policies that truly mitigate against financial disaster for you or your loved ones but work for your budget. Allowing your brain to wander down the rabbit hole of every possible disaster scenario can easily lead to a panicked impulse to purchase every type of insurance policy.

Alternatively, you might just feel too overwhelmed and wind up ignoring the task of being properly insured until you’re confronted in some way with a realised risk.

Even if you do manage to live to a ripe old age and never suffer a long-term illness or injury, you’re still likely to need care or aid at some point. Long-term care insurance has been touted as a solution to the enormous cost of providing care and aid to our ageing population.

And younger generations, unfortunately, might be facing more precarious financial situations than older people due to high housing and education costs, the perpetual concern about the viability of social security, and other factors.

The reality, unfortunately, is that the cost of policies has increased dramatically over the years and may feel prohibitively expensive, particularly for women who are charged significantly more on average because we are statistically likely to live longer. Your rates may also not be locked in and your premiums could increase over the years.

Long-term care insurance is completely different from long-term disability insurance. The latter covers a portion of your lost income if a disability renders you unable to work. Long-term care insurance covers the cost of care such as a nursing home, a home health aide or a memory care facility.

As with most policies tied to your health and mortality, the younger you are, the better the deal. However, that doesn’t mean a healthy 30-something should buy a long-term care insurance policy, especially when other financial demands are taken into account. Instead of long-term care insurance, it makes more sense for millennials, and certainly for the much younger Gen Zers, to secure life insurance and disability insurance. 

The reality is that we’re not that young any more. I’m 34 and pretty much right in the middle of the millennial generation. A simple term life insurance policy is sufficient for most people who have children or are planning to (or have any family member likely to rely on your income), and can be affordable, especially when purchased young.

Perhaps a feeling of decision fatigue is why so many people, especially millennials and Gen Z, find themselves without proper insurance coverage.

And as much as you dislike thinking about an early death, it’s equally uncomfortable to acknowledge the possibility that you would need disability insurance during your working years. Disability isn’t just about getting hurt on the job but the fact that you could suffer an injury or illness some other way that keeps you out of the workforce for a period.

Disability insurance, unfortunately, can be difficult to acquire as an individual; some employers offer short- or long-term policies as part of group coverage, but an individual policy can cost as much as 3 per cent of your annual salary. 

Both disability and life insurance might be available through your employer, but how long will you work there? The policies don’t often go with you as you job-hop and securing policies later in life, especially for life insurance, will cost more. 

Millennials and Gen Z also should consider the risk of identity theft. Boomers and Gen X need to be vigilant as well, but millennials and Gen Z will spend more years in a technologically advanced world, vulnerable to online crimes.

Insurance against identity theft isn’t necessarily going to make you financially whole in the event of a large-scale takeover of your life, but monitoring might help you flag any suspicious activity early. Many identity theft insurance policies help cover the cost of restoring your identity, which could include legal fees, bank fees, notary fees, and even childcare. Some policies can connect you with a specialist to help hold your hand through the process of restoring your identity or even act on your behalf.

Being out potentially hundreds of dollars a month in just premiums for insurance isn’t in the budget for many – which is why it’s important to prioritise what you need based on your current stage of life and what is already available through your employer. A term life insurance policy should really win out over long-term care insurance right now. Sure, it would be a lot cheaper to lock in long-term care as a 30-something, but that money may be better spent elsewhere, and my generation and Gen Z will have to evaluate the landscape of ageing as we move through our working years. 

Article repurpose from The Straits Times by Erin Lowry.