Insurance Basics for Newly Independent Adults

So you’re living on your own for the first time? Congratulations! Here’s a primer on a very important aspect of adulting: insurance.

Insurance in General

The basic idea behind insurance is that you pay a set amount (called a premium) to an insurance company on a regular basis, and in exchange, the company will cover certain expenses you may incur in the future, either by directly paying the bills or by reimbursing you for part or all of what you paid. You may also be required to pay a certain amount of the total expense (called a deductible) before the insurance will kick in the rest. The exact premium and deductible required can vary enormously depending on which policy you choose, as can the exact types of expenses the policy will cover.

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Health Insurance

You probably already know exactly why you should have health insurance, but do you understand how it works? Health insurance covers at least some of your medical expenses, although the exact amount depends on (among other things) the type of medical treatment, whether or not the hospital or doctor’s office you were treated at is part of your insurer’s network, and how much you’ve already spent on medical treatment this year. Don’t assume that policies are more or less identical: while the Affordable Care Act is a US federal law that regulates health insurance in some ways, it allows for quite a bit of variation from plan to plan, and state governments still have the power to enforce rules that don’t violate the ACA. Health insurance in Massachusetts, for example, must cap deductibles at $2000 per year for an individual as one of the qualifications for Minimum Creditable Coverage, but that’s not the case in many other states.

Renters Insurance

Renters insurance serves two main purposes. First, it can cover some or all of the cost of replacing your belongings if they are stolen or damaged in a fire or other disaster. It can also cover your legal expenses if, say, your dog bites a visitor to your apartment or a guest slips and falls in your kitchen. As with health insurance, renters insurance is covered by different regulations from state to state.

Car Insurance

Car insurance also covers several distinct possibilities, and most US states require vehicle owners to have it (though once again, different states have different regulations). Situations in which car insurance will typically cover some or all of your expenses include your car being stolen or destroyed by a natural disaster, your being at fault in a vehicle accident that causes injury or property damage to someone else, or someone else causing an accident which injures you or damages your car (depending on exactly what type of car insurance the other person has). Some policies cover more types of incidents than others, so make sure you know what you’re getting before you sign up.

There are other types of insurance available (such as life insurance, homeowner’s insurance, and even pet insurance) but these three are the ones most likely to be relevant to an adult who’s just starting out.

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