There’s a definite comfort in knowing that even if your health takes an unexpected turn, you and your family have a financial safety net. When money’s tight, though, paying for both a life insurance policy and healthcare coverage each month can get tricky. As expenses start to mount, it can be tempting to drop one or the other to make ends meet.
The reality is that a lot of people genuinely need both types of protection, especially if they have dependents. If that’s the case, the better idea is to limit coverage to what you truly need so you can afford both types of insurance.Keep in mind that insurance needs can change dramatically during different life stages. What might seem essential for a parent with teen children might not be so important for a recent college graduate or a retiree.
The “Young Invincibles”
Prior to the 2014 rollout of the Affordable Care Act (signed into law in 2010), many 20- and 30-somethings chose to forgo health insurance altogether. And not without reason: These “young invincibles” as some experts call them, have a much lower incidence of health problems than most segments of the population. Paying a premium every month just seemed unnecessary to some.But with the ACA imposing a mandate on most American to have health coverage, that started to change. In 2018, the penalty for being uninsured is $695 per adult, or 2.5% of earnings, whichever is higher. (See Obamacare Penalty Enforcement: How It Works.) That has amounted to a pretty strong incentive to sign up.
The Tax Cuts and Jobs Act eliminated the mandate (or, more strictly speaking, the noncompliance penalty), starting in 2019. Still, once you consider the advantages of health care coverage, you might well want to have it.
One piece of good news for recent grads is that the ACA allows you stay on your parent’s plan until the age of 26 or even 29, depending on the plan. That may buy you some time before taking out a policy of your own.
If relying on your mom and/or dad’s policy isn’t an option and you’re under the age of 30, a relatively inexpensive catastrophic policy might be worth a look. You won’t be reimbursed for most doctor visits and other day-to-day health needs, but after you reach a certain deductible, you’ll have a safety net if you end up experiencing a major medical issue. For people with a nearly spotless health record, this minimal amount of insurance is often enough.
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If you happen to live in a state that chose to expand Medicaid as a result of the ACA, you might even be able to get coverage through that program. If you just graduated and are working at the local coffee shop or grocery store to make ends meet, it’s possible that you could qualify.
While you may not have much choice when it comes to obtaining health coverage, life insurance is a different matter. If you don’t have any kids yet, you may not need it.
There are a few exceptions. If you’re financially supporting your parents or grandparents, you’ll want to take out a policy that’s large enough to handle their needs. Or you might want a small policy that will cover your funeral expenses if the unforeseen should occur. As long as you stick with a no-frills term policy, this type of coverage usually isn’t all that expensive for someone in his or her 20s or 30s.