Risk Management Tips for YPs
If life throws you a curve ball, will you be protected?
Young professionals share many of the same insurance needs as most other demographics of people. The difference is that young professionals are protecting their future earnings and assets, whereas an older demographic is looking to protect what has already been earned. I often speak with fellow young professionals about the challenge of balancing appropriate coverage with a tighter monthly budget. Unfortunately, many young professionals look at the bottom line rather than what would happen if life threw a catastrophic event their way.
First, it’s important to understand the concept of insurance. Insurance, or risk management as it is sometimes referred to, is paying a 3rd party a relatively small and consistent amount of premium in exchange for that 3rd party to protect you from an unknown and potentially large claim. There are all types of insurance available. Below are several types of insurance that I feel are often overlooked by young professionals.
One of the most common is auto insurance. As we all know, the government requires us to carry a minimum amount of coverage in order to legally drive. These minimum requirements vary from state to state, but in Iowa we are required to carry $20,000 per person/$40,000 per accident in bodily injury coverage and $15,000 in property damage coverage. Although this is better than no insurance, and usually the least expensive option, it will leave you short on coverage in most claim situations.
When coverage provided by any 3rd party is exhausted, that leaves you financially responsible for anything not covered, and every legal avenue will be used to collect that remaining amount from you. My advice, spend a little more monthly to carry AT LEAST $100,000 per person/$300,000 per accident in bodily injury coverage and $100,000 in property damage coverage. Given that motor vehicle accidents are the leading cause of mortality and serious injury for people ages 4-34, (according to the Insurance Institute for Highway Safety) you’ll be happy you did.
Another often-overlooked area of auto insurance is uninsured motorist and underinsured motorist coverage. I find that a lot of policies purchased online by people directly from the insurance carriers, and even those purchased through 800 numbers, are often not including (or grossly limiting) this coverage in order to provide a favorable premium. — This is a HUGE mistake. This coverage protects you and your passengers when others on the road carry minimum limits or no insurance at all. It doesn’t make sense to provide more coverage for others on the road than you provide yourself, now does it? The expense is well worth it!
Liability insurance with personal injury protection, provided through renter’s insurance policies for example, is another area most avoid if given the option. More often than not, when asked about buying a renter’s insurance policy I get the response: “I don’t own anything worth getting insurance coverage on.” Beyond the fact that I know this isn’t true, the real reason I offer clients renter’s insurance is for the liability coverage it provides. For example, if you leave a candle burning and it causes a small fire, or you decide to post something negative on Facebook about another’s character, or your neighbor trips on your doormat… Well, these instances could lead to you getting sued for negligence or defamation of character. Without a renter’s insurance policy with personal injury protection, you have no coverage! $20,000 in property damage and $300,000 in liability coverage should cost you $10-25/month. Buy it!
Disability insurance is yet another policy that is very important for young professionals. According to lifehappens.org, 1 in 4 of today’s 20-year-olds will become disabled before they retire — that’s a staggering number! Although most employers provide up to 60 percent of your wages for long-term disability, after taxes it ends up being closer to 45 percent. With massive student loans, high rent, car payments, and trying to save for retirement, most couldn’t survive on 45 percent alone. A supplemental disability insurance policy is available to help cover this gap. Please consider talking to a financial advisor about this – the statistics are too high to ignore it!
Hopefully you find these tips helpful. If nothing else, please at least treat insurance like you would any other product. Do some research, ask a professional and be sure to seriously consider the impact that saving $10.00/month could have on your future.
Trevin Quandt is an Account Executive for the Miller, Fidler & Hinke Insurance Agency in Clive, Iowa. Have questions? Contact Trevin at Trevin@mfhins.com.