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Insurance every 20-something-year-old should consider

Insurance 101

What you can do to protect your finances as a 20-something-year-old.

In your twenties, full of dreams and energy, life is a big adventure. Insurance might not be on your radar yet, but as you start adulting—moving out, buying stuff like phones and cars, or even thinking about a family—getting financially savvy starts creeping up the list.

So, let's break it down and help you figure out what insurance could be handy for you right now. In this blog, we're laying out the various types of insurance and giving you examples of when they could make sense for someone in their twenties. But before we dive in, remember that insurance is not one-size-fits-all – it’s as unique as you are. Here are a couple of questions that you can ask yourself when reading over the blog:

  • Do I have people who are dependent on me?
  • What goals do I have? (Specifically financial goals)
  • What do I own and what do I want to protect?
  • What stage of life am I in? Perhaps you’ve just finished studying, and you’re paying off a student loan, or maybe you’ve recently married.
  • What is my cash flow situation? Do I have enough money to buy a new car if it’s written off, or would paying a couple of hundred rand for insurance make more sense?

Should I insure my car?

A car is not a cheap asset that can be easily replaced if you were to 'lose' it – unlike a single sock. And a question worth asking your twenty-something-year-old self is whether you’d be left in a sticky situation if your car were to be written off or stolen.

Here’s what we mean by a “sticky situation”:

  • Struggling to get to work without your car, putting your job at risk
  • Still having to pay off your car loan without a car
  • Scraping by month-to-month because you’re paying off a lawsuit from when you drove into the back of a BMW
  • Or a situation where your car is already paid off and you’re not in a financial position to replace your car

So what are your options? Car insurance comes in two flavours: Comprehensive car insurance and third-party liability.

Comprehensive car insurance is what it says on the tin – comprehensive. It will cover your car from accidental damage (think dents, scratches, or bigger damage from an accident), theft and a write-off (if the car is declared undrivable). It also covers you if you have damaged someone else’s property with your car. This is the scenario we mentioned above where you might drive into the back of a BMW and the owner holds you financially responsible to pay for the repairs/replacement of the car.

Third-party insurance won’t cover any damage done to your own car but it will cover you if someone had to sue you because your car damaged their property.

By getting car insurance, you’re looking out for your future self and potentially protecting you from having to fork out unnecessary amounts of money because of a car accident.

Should I insure any of my other stuff?

Let's switch gears to talk about the gadgets, gizmos, and goodies you've accumulated over the years. Yes, we mean your phone, laptop, sneakers, and even that sleek TV. Individually they might not be worth as much as your car but accidents happen, theft occurs, and these things still cost quite a bit to replace. But there's a way to protect them—through contents insurance or standalone item insurance.

Home contents insurance covers the things in your home as a collective. It's a security blanket for all your possessions against unforeseen incidents like fire, theft, or water damage. You pay a single premium, and everything from your TV to your kitchen appliances are under the protective umbrella.

Standalone item insurance, on the other hand, focuses on insuring specific valuable items. Your latest iPhone? Check. Your Canon camera? Check. This type of insurance often includes cover for situations that content insurance might not, like business use. For example: If your camera is stolen while you’re on a shoot (which you’re making money from), standalone item insurance will cover you but contents insurance might not.

REMEMBER, it all comes down to what you can afford. Here are two key things to think about:

  1. Home contents insurance might be more affordable if you have several items that, if stolen or damaged, would strain your finances.
  2. Opt for single item insurance if you only want to protect one or two significant items.
  3. Having a higher excess—a sum you pay when you make a claim—can reduce your monthly premium but increase your one-time out-of-pocket expenses if something goes wrong. So, if your monthly budget is tight but you have some savings, a higher excess could be a smart choice.

What kind of insurance should I consider for myself?

Let’s take a look at how you can protect yourself with personal insurance.

Cover for things like hospital visits and doctor appointments

"Health is wealth," as they say, and this adage holds true. However, when illness strikes, it can also bring hefty expenses along for the ride. That's precisely where medical aid schemes and hospital plans step in to provide a helping hand.

Medical aid is a comprehensive health insurance plan that covers a wide range of healthcare services, from GP visits to prescription medicine, surgeries, and specialist doctors. Depending on your plan, you could also get cover for things like eye care, dental care, and even maternity benefits. While medical aid plans can be more pricey, they do cover a lot.

Hospital plans, on the other hand, are more affordable and they focus mainly on in-hospital care. They cover the costs if you’re hospitalised, require surgery, or need treatments while in the hospital. Some plans might also cover chronic diseases. But, remember that routine doctor's appointments and day-to-day health expenses are generally not covered.

Let's consider a scenario: you’re a healthy, active individual and rarely visit a doctor, but you worry about unexpected emergencies. In this case, a hospital plan might be perfect, covering you in case of sudden health crises like a broken leg from a hiking accident or an unexpected illness requiring hospitalisation.

Cover to protect your loved ones financially in case something happens to you

As a twenty-something who is healthy and young, you might not believe you need this kind of coverage, especially if you're still solo on this journey. But life insurance does more than you might think.

Imagine this: If you've got a student loan with your parents as co-signers, life insurance steps in. It takes the weight off their shoulders, ensuring they won't be left juggling debts if the unexpected happens.

Cover in case you become disabled or ill and you can’t work anymore

Disability and chronic illness insurance covers you if you're unable to work because you become very sick or disabled. It usually pays a percentage of your income each month or in a lump sum and can be really important if you're the primary breadwinner in your home. Imagine if you developed a chronic condition that prevented you from working – disability insurance would ensure you'd still receive a steady income to cover your living expenses.

Cover to help your family pay for your funeral

While not something we like to think of, funerals can be expensive. Funeral cover can ease some of that financial burden and allow your loved ones to focus on what’s important, rather than worrying about costs.

Funeral insurance is generally a smaller payout and pays out a lot quicker than other types of life insurance policies. It is designed to cover the immediate expenses of a funeral rather than helping with long-term financial support for your family.

P.S. This isn’t financial advice, just some content to help you figure out what’s best for you.

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