When you’re a young adult, your to-do list seems endless. Between kick-starting your career, balancing social life, and maybe even tackling student loans, insurance probably doesn’t top your priority list.

But here’s the thing: the choices you make about insurance now can have a significant impact on your financial future. Unfortunately, many young adults fall into common traps when it comes to insurance. Whether you’re completely new to insurance or already have some coverage, knowing what to avoid is just as important as knowing what to do.

Mistake #1: Thinking You Don’t Need Insurance

It’s easy to think, “I’m young, healthy, and careful, so I don’t need insurance just yet.” This mindset is understandable but risky. Emergencies, illnesses, and unexpected events don’t care how young or healthy you are. From car accidents to medical emergencies, the unexpected can strike anyone.

How to Avoid It:

  • Start with health insurance. Even if you’re rarely sick, all it takes is one trip to the emergency room to create a massive bill. If your employer doesn’t offer health insurance, explore plans through the marketplace or see if you can stay on your parents’ plan (typically allowed until age 26 in the U.S.).
  • Consider renters or home insurance. If you rent, renters insurance is surprisingly affordable and protects your belongings from theft or damage. Homeowners insurance is equally important for protecting what’s likely your largest investment.
  • Look into term life insurance. If you have dependents or co-signed loans, life insurance ensures your loved ones won’t bear the financial burden if something happens to you.

Mistake #2: Choosing the Cheapest Option

When budgeting is tight, it’s tempting to choose the bare minimum coverage to save a few bucks. While cost is an important factor, going for the lowest-priced option can leave you underinsured. Skimping on coverage might seem fine until you actually need to file a claim and realize it doesn’t cover enough.

How to Avoid It:

  • Match coverage limits to your needs. For example, if you’re insuring your car, make sure your liability coverage is sufficient to cover potential damages in an accident.
  • Take the time to compare plans. Low premiums might come with high deductibles or limited benefits, so read the fine print to understand what’s actually covered.
  • Think long-term. Spending a bit more on coverage now can save you from significant out-of-pocket expenses later on.

Mistake #3: Forgetting About Your Employer’s Benefits

If you’re working full-time, there’s a good chance your employer offers a range of benefits, yet many young adults overlook them. From health insurance to disability coverage, these perks are often provided at reduced costs or even for free, but they only benefit you if you actually enroll.

How to Avoid It:

  • Attend open enrollment meetings and take your time reviewing your benefits package.
  • Ask questions if you’re unsure. HR departments are there to help you understand your options.
  • Take advantage of life and disability insurance if your employer offers it. These policies are often much cheaper through work plans than on the private market.

Mistake #4: Neglecting Disability Insurance

Disability insurance tends to be one of the most overlooked types of coverage among young adults. You might assume it’s unnecessary, but statistics show that one in four workers will face a disabling event at some point before retirement. Without disability insurance, losing your income due to illness or injury could leave you financially devastated.

How to Avoid It:

  • Add disability insurance to your financial safety net as early as possible. Premiums are typically more affordable when you’re young and healthy.
  • Check whether short-term or long-term disability insurance is included in your employee benefits and make a plan to fill any gaps.

Mistake #5: Not Shopping Around for Car Insurance

Many young adults stick with the car insurance policy they inherited from their parents or grab the first policy they come across. While that works for a while, you might end up overpaying or locked into a policy that doesn’t fit your needs.

How to Avoid It:

  • Compare quotes from multiple insurers to find a good balance between coverage and cost. Websites and apps make this process quick and easy.
  • Look for discounts, such as those for safe driving, bundling policies, or staying accident-free.
  • Revisit your policy annually to see if you qualify for lower rates or better deals.

Mistake #6: Failing to Adjust Coverage Over Time

Your insurance needs are likely to change as you move through life. Maybe you’ve graduated from college, landed a new job, moved, or gotten married. Whatever the case may be, failing to revisit your insurance policies can leave you underinsured or paying for coverage you no longer need.

How to Avoid It:

  • Schedule an annual “insurance checkup.” This is a good time to review all your policies and make adjustments based on your current situation.
  • Inform your insurer about big life changes, like moving to a new city or buying a home.
  • Evaluate add-ons or riders. For example, if you’ve bought expensive jewelry or equipment, you may need additional coverage.

Insurance might not be the most exciting topic, but making smart choices about your coverage now can save you from financial headaches (and heartaches) later.