Insurance is one of those topics that makes most people’s eyes glaze over — until something goes wrong and they’re suddenly very interested in what their policy does or doesn’t cover.
The insurance industry is also not exactly shy about selling you things you don’t need. Extended warranties, gap insurance, accidental death policies, credit card insurance — there’s a whole ecosystem of products designed to prey on people who aren’t sure what they actually need.
This guide cuts through it. Here’s what you genuinely need, what’s worth considering depending on your situation, and what you can safely skip.
The Non-Negotiables — Insurance You Must Have
1. Health Insurance — The Most Important Policy You’ll Ever Own
Health insurance remains the most critical type of coverage for millennials. Medical costs can escalate quickly — even from a single emergency room visit or unexpected diagnosis. Without insurance you could face thousands or tens of thousands of dollars in medical debt.
If you’re employed, use your employer’s plan — even if the premiums feel high, employer group rates are almost always better than what you’d pay individually. If you’re self-employed or between jobs, check healthcare.gov for marketplace plans. Depending on your income, you may qualify for significant subsidies.
What to look for in a health plan:
- Premium (monthly cost) vs deductible (what you pay before insurance kicks in) — higher deductible = lower premium, but more out of pocket when you use it
- Network — make sure your preferred doctors are in-network
- Mental health coverage — increasingly important and often underutilized
- HSA eligibility — if you’re generally healthy, a high-deductible plan paired with an HSA is often the smartest financial move
2. Auto Insurance — Required by Law, But Know What You’re Paying For
If you own a car, you’re legally required to carry at least liability insurance in every US state. But there’s a big difference between minimum coverage and smart coverage.
The coverage types:
- Liability — covers damage you cause to others. Required. Don’t skimp here — low limits mean you’re personally liable for anything beyond the policy.
- Collision — covers damage to your car in an accident. Required if you have a car loan or lease.
- Comprehensive — covers non-accident damage (theft, weather, fire). Required with most loans.
- Uninsured motorist — covers you if someone hits you and has no insurance. Worth having.
- Medical payments — covers your medical bills regardless of fault. Optional but useful.
How to save on auto insurance:
- Shop around annually — loyalty rarely pays in insurance
- Bundle with renters or homeowners insurance — usually saves 5-15%
- Take a defensive driving course — many insurers offer discounts
- Consider a telematics program — usage-based insurance that rewards safe driving with discounts
If you do delivery or rideshare work as a side hustle, rideshare companies don’t cover you one hundred percent of the time you’re on the road and your personal policy generally won’t cover incidents that occur while using your car for business. Talk to your insurer about rideshare coverage.
3. Renters Insurance — The Most Underrated Policy Available
If you rent and don’t have renters insurance, fix that today. It’s typically $15-$30 per month and covers:
- Your personal belongings if stolen, damaged by fire, or certain water damage
- Liability if someone is injured in your apartment
- Temporary living expenses if your unit becomes uninhabitable
Too many renters assume their landlord’s insurance covers their personal belongings — it doesn’t. Your landlord’s policy covers the building, not your possessions or liability risks inside your unit.
For less than the cost of a streaming subscription, renters insurance covers thousands of dollars worth of electronics, furniture, and belongings. There is almost no scenario where skipping it makes financial sense.
Insurance Worth Having Depending on Your Situation
4. Life Insurance — Sooner Than You Think
Most people in their 20s think life insurance is for parents with kids and mortgages. That’s mostly true — but not entirely.
If you’re in your 20s or 30s, life insurance probably feels like something for later. But waiting means paying more later — sometimes much more. When you’re young and healthy, coverage is more affordable and flexible than most people realize.
You need life insurance if:
- You have people who financially depend on you (spouse, children, aging parents)
- You have co-signed debts (student loans, mortgage) that someone else would inherit
- You want to lock in low rates while you’re young and healthy
Term life insurance is usually the most cost-effective option — providing coverage for a set period like 20 or 30 years. A healthy 30-year-old can often get $500,000 of coverage for $25-$35 per month. That same coverage at 45 might cost three times as much.
If you’re young, single, debt-free, and nobody depends on your income — you can skip this for now. But revisit it the moment any of those things change.
5. Disability Insurance — The One Most People Completely Ignore
Here’s a statistic that should get your attention: you are statistically far more likely to become disabled and unable to work than you are to die young. Yet almost nobody in their 20s and 30s has disability insurance.
Disability insurance replaces a portion of your income — typically 60-70% — if you’re unable to work due to illness or injury.
Short-term disability — covers a few weeks to months. Many employers provide this.
Long-term disability — covers extended periods, potentially years. This is the one worth paying for.
If your employer offers long-term disability coverage — take it. If not, look into individual policies through insurers like Guardian, Principal, or MassMutual. It’s less exciting than life insurance but arguably more important.
6. Homeowners Insurance — Required, But Optimize It
If you own a home your mortgage lender requires homeowners insurance. The key is making sure you have the right coverage, not just the minimum.
Things to check:
- Replacement cost vs actual cash value — replacement cost pays to rebuild at current prices. Actual cash value pays depreciated value. Always get replacement cost.
- Flood insurance — standard homeowners policies don’t cover flooding. If you’re in a flood zone, this is separate and mandatory. Even outside flood zones it’s worth considering.
- Liability coverage — make sure it’s adequate. At least $300,000 is a reasonable baseline.
- Umbrella policy — if you have significant assets to protect, a personal umbrella policy adds an extra layer of liability coverage cheaply.
What You Can Safely Skip
Extended warranties Retailers make enormous margins on these. Most electronics and appliances either fail within the manufacturer’s warranty period or last years beyond the extended warranty. The math rarely works in your favor. Skip them.
Credit card insurance / payment protection These policies pay your minimum credit card payment if you lose your job or become disabled. They’re expensive for what they provide and riddled with exclusions. A proper emergency fund serves the same purpose without the ongoing cost.
Mortgage life insurance Sold by lenders to pay off your mortgage if you die. It’s almost always more expensive than regular term life insurance for the same coverage. If you need life insurance, buy term — don’t buy this.
Accidental death and dismemberment (AD&D) standalone policy This only pays if you die or are injured in a specific type of accident. Regular term life insurance covers death from any cause and is almost always a better use of the same premium dollars.
Flight insurance Costs a few dollars per flight. The odds of a fatal flight accident are vanishingly small. If you need life insurance, buy term coverage. Don’t buy insurance for individual flights.
How to Save Money on Insurance Without Sacrificing Coverage
Shop around every year. Insurance companies count on inertia. Rates vary significantly between providers for identical coverage. Spending 30 minutes comparing quotes annually can save hundreds of dollars.
Bundle policies. Most insurers offer meaningful discounts — typically 5-15% — when you combine auto and renters or homeowners insurance.
Raise your deductibles. A higher deductible means lower premiums. If you have a solid emergency fund, you can comfortably self-insure for smaller claims and save on premiums. Use insurance for catastrophic events, not minor ones.
Maintain good credit. In most states insurers use credit scores to set premiums. Better credit often means lower insurance costs — another reason to take your credit score seriously. Check out our credit and debt guide for strategies to improve yours.
Ask about discounts. Many insurers offer discounts for things like being claim-free, paying annually instead of monthly, having safety features in your home or car, or completing safety courses. Ask — they don’t always advertise them.
The Simple Insurance Checklist
| Coverage | Priority | Notes |
|---|---|---|
| Health insurance | 🔴 Essential | Get this first |
| Auto insurance | 🔴 Essential | Required by law |
| Renters insurance | 🔴 Essential | Cheap, almost always worth it |
| Life insurance | 🟡 Situational | Need it if others depend on your income |
| Disability insurance | 🟡 Often overlooked | More important than most people realize |
| Homeowners insurance | 🔴 Essential if you own | Required by lender |
| Extended warranties | 🟢 Skip | Rarely worth it |
| Credit card insurance | 🟢 Skip | Build an emergency fund instead |
| Mortgage life insurance | 🟢 Skip | Buy term instead |
| Flight insurance | 🟢 Skip | Waste of money |
Conclusion
Insurance isn’t exciting. But being uninsured when something goes wrong — a car accident, a medical emergency, a break-in — is financially devastating in a way that takes years to recover from.
Get the essentials in place, optimize what you’re paying, and skip the products that exist to profit from your anxiety rather than genuinely protect you. That’s really all there is to it.
Review your coverage once a year — when it comes up for renewal is a good trigger — and shop around. The 30 minutes you spend comparing quotes could save you more than most side hustles pay.
Note: Insurance products, rates, and regulations vary by state and individual circumstances. This article is for educational purposes only. Always consult a licensed insurance professional for advice specific to your situation.