Congrats! You’ve made it to your 20s. You may have gone on to a 2-year or 4-year college after high school or started working an apprenticeship or other job right after graduation. Regardless, you’re earning your own money to support yourself, have moved out of your rent’s house, and are finally able to afford a few things you’ve always wanted.
But wait! Before you get too carried away with your new hard-earned cash there’s something you should consider. It’s not investing for retirement (although yes you should do that too!) but it is equally as important. You need to buy disability insurance.
WHY WOULD A 20 – 29 YEAR OLD BUY DISABILITY INSURANCE?
Although you may be young and healthy with no real concern of a disability impacting your ability to work in the future, there’s still ample reason for 21, 22, or 23-year-olds to purchase disability insurance
For one, the younger you are, the cheaper disability insurance will be. While disability insurance may not seem important currently, if you were to ever purchase a policy in the future it will cost you considerably more the longer you wait. If you keep income, location, benefit period, and waiting period the same, but were to change the time of purchase, you’d find that the same disability policy purchased at age 25 for $100/month could cost you $168/month at age 35, $208/month at age 45, and $238/month at age 55.
In addition, it’s important to purchase disability insurance when you’re young and healthy, and before you develop an illness that classifies as a preexisting condition. If you do develop something that is deemed a preexisting condition it will either make you ineligible for disability insurance or make your policy much more expensive.
For example, disability insurance for a healthy 20-year old dental assistant living in Texas could cost around $100/month for $2,400/month of coverage whereas disability insurance for the same 20-year old, but with back problems, could cost closer to $300/month.
WHAT COULD A 20 – 29 YEAR OLD USE DISABILITY INSURANCE FOR?
Besides the fact that you can purchase disability insurance for 24, 26, or 25 year olds at the lowest rate possible, there are a lot of reasons why you would want to protect yourself with this type of policy.
If you’re out of income for longer than you have savings to live off of you won’t be able to pay your bills on time, likely resulting in having to rack up credit card debt to make ends meet. Missing bills could result in ruining your credit, which can take years to build back up.
If you know eventually you’ll want a family, or if you’re already married or have children, then you must factor that into your decision as well. No income means being unable to provide for your family and children (or future children!) If you’re planning on being the primary breadwinner or know your family couldn’t live without your income, then it’s important to plan ahead.
And how about investments? A few years without income means missing out on the ability to invest and take advantage of compound interest. If you’re hoping to retire earlier than the standard retirement age missing out on a few years of investing early on can really derail your plans.
If you have no income and are thus unable to keep up with your rent or mortgage payments, you run the risk of becoming evicted or defaulting on your mortgage or worst case, foreclosing on your home.
Or if you don’t own a home but plan to in the future, you’ll no longer be able to start or continue saving for that home you were hoping to purchase in the next few years.
And then there are the medical bills. If you become sick or injured and can’t work, how will you pay for medical expenses? Medical bills and loss of income are among the top reasons why individuals file for bankruptcy.