Question: I just read your column on renters insurance for young adults. What other types of insurance would you recommend for this age group?
Answer: For starters, young adults generally don't need life insurance. You need life insurance only if someone depends on you financially.
What you do need is health insurance. Your parents' plan is likely to cover you as long as you're a full-time student, until you turn 22. After that, young adults often go without health insurance, betting on their own good health.
But you're risking financial disaster in case of an accident or unexpected illness. And you do have affordable alternatives even if you're not covered at work.
One of the best options is a student health plan from eHealthInsurance.com. Only full-time students can apply — so do it before you graduate. Once you're covered, you can keep the policy as long as you need it.
As an example, my college-student son, who lives in Maryland and goes to school in Philadelphia, would pay $825 a year for a policy with a $1,000 deductible and a 20 percent co-payment, or $615 for a policy with a $2,500 deductible. That would mean he'd have to pay up to $1,000 or $2,500 out of his own pocket, plus 20 percent of the bill after the deductible. But because he's healthy, that's a reasonable risk, and he'd be protected in case of catastrophe.
Once he has income of his own, it would make sense to consider buying a catastrophic policy with a high deductible and taking advantage of the new health savings account, or HSA. He could put the amount of the deductible — up to $2,600 for singles — into an HSA, get a tax deduction for his contribution, accumulate tax-free earnings in the account and withdraw the money tax-free to pay out-of-pocket medical expenses, such as the deductible and co-payments.
If it's too late to buy a student policy, look into short-term insurance. Generally less expensive than student policies — but often with more exclusions — this coverage remains in effect for up to 185 days. It's not renewable, but you can apply for a new policy. The biggest providers are Fortis, at www.stm.us.fortis.com, and Golden Rule, at www.goldenrule.com.
If you're in good health and live in a state with a competitive health-insurance marketplace, you may be able to find comprehensive long-term coverage at a reasonable price. Contact a health insurance broker in your area.
Have a question about kids and finances for Dr. Tightwad? Write to Dr. T at 1729 H St., N.W., Washington, D.C. 20006. Or send the good doctor an e-mail message (and any other questions for this column) to email@example.com.